Linear Technology (LLTC) Q4 Earnings: What's In The Cards?

Linear Technology (NASDAQ:LLTC) is set to report fourth-quarter fiscal 2016 results on Jul 26. Last quarter, the leading OEM of analog and mixed signal semiconductors posted a positive earnings surprise of 4.0%.

Let’s see how things are shaping up for this announcement.

Factors to Consider

Linear’s third-quarter fiscal 2016 earnings of 52 cents exceeded the Zacks Consensus Estimate by a couple of cents. Higher revenues and a lower tax rate from the permanent reinstatement of the R&D tax credit drove the results.

Also, revenues of $361.1 million were above the Zacks Consensus Estimate of $359.0 million and on the upper end of the company’s guided range. An improvement in sales in the Transportation and Industrial markets plus better-than-expected performance of the Communications market were the catalysts.

Linear’s business is well diversified among core markets, such as industrial, automotive and communications infrastructure. However, weakness in the PC and notebook markets could hit the computing business and dampen the upcoming results.

For the fiscal fourth quarter, management expects revenues to increase only 2% to 5% sequentially due to weakness in a few markets and a cautious macroeconomic environment.

Earnings Whispers

Our proven model does not show that Linear will beat on earnings this fiscal quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 53 cents. Hence, the difference is 0.00%.

Zacks Rank: Linear has a Zacks Rank #3, which increases the predictive power of ESP. But a 0.00% makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

You could consider the following stocks with a positive Earnings ESP and a favorable Zacks Rank:

CalAtlantic Group, Inc. (NYSE:CAA) has an Earnings ESP of +9.21% and a Zacks Rank #1. The company is slated to report second-quarter earnings results on Jul 28.

Casella Waste Systems Inc. (NASDAQ:CWST) has an Earnings ESP of +20.0% and a Zacks Rank #1. The company is slated to report second-quarter earnings results before the market opens on Jul 28.

Bristol-Myers Squibb Company (NYSE:BMY) has an Earnings ESP of +1.49% and a Zacks Rank #1. The company’s second-quarter earnings release date is Jul 28.