Semiconductor Stock Earnings Due On Apr 25: TXN, MTSI, CREE

The first-quarter earnings season is picking up pace, with results from 95 S&P 500 members or 24.9% of the index’s total market capitalization already out (as of April 21).We expect almost 800 companies to report results this week, including 191 S&P 500 members.

Per the latest Earnings Preview, total earnings of these index members are up 14.3% year over year on the back of 4.6% higher revenues. Beat ratios are impressive with 72.6% beating earnings estimates and 62.1% coming ahead of revenue expectations.

Investors seem to be rejoicing as most of the companies have so far surpassed their estimates, particularly revenue estimates, in the first quarter. Also, growth has revved up from the preceding quarter and is on track to reach its highest level in almost three years. Continuation of these trends through the rest of this earnings season should serve as a reassuring development for the market.

Total Q1 earnings are expected to rise 9.1% from the year-ago period on revenue growth of 6.0%. Five out of 16 Zacks sectors are expected to witness a decline in earnings in the first quarter, with Conglomerates, Autos and Transportation being the biggest drag.

Technology will be in the spotlight this week, with several major companies including Alphabet (NASDAQ:GOOGL) aka Google, Microsoft (NASDAQ:MSFT) and Amazon (NASDAQ:AMZN), scheduled to report results this week.

Here we take a look at three semiconductor companies that are set to report their quarterly earnings on Apr 25:

Texas Instruments Inc. (NASDAQ:TXN) ,or TI, a global semiconductor company and one of the world's leading designers and suppliers of digital signal processors and analog integrated circuits, is slated to release its first-quarter 2017 earnings results.

According to our model, a company needs the right combination of two key ingredients – a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) – to increase its odds of a positive earnings surprise.

Consequently, we do not expect the company to post an earnings beat since it carries a Zacks Rank #2 and an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Texas Instruments is benefiting from solid execution. Also, the company continues to prudently invest its R&D dollars in several high-margin, high-growth areas of the analog and embedded processing markets. This is gradually increasing its exposure to the industrial and automotive markets and increasing dollar content at customers, while reducing exposure to the volatile consumer/computing markets.

We remain optimistic about TI’s compelling product line, the differentiation in its business and lower-cost 300mm Analog output. (Read More: Texas Instruments Q1 Earnings: Is a Surprise in Store?)

Notably, Texas Instruments’ results surpassed the Zacks Consensus Estimate in all the preceding four quarters. It has an average four-quarter positive surprise of 7.09%.

We also don’t expect MACOM Technology Solutions Holdings Inc. (NASDAQ:MTSI) , a provider of analog semiconductor solutions for use in wireless and wireline applications across the RF, microwave and milli meterwave spectrum, to post an earnings beat when it reports first-quarter 2017 results.

This is because the company has a Zacks Rank #3 but an Earnings ESP of 0.0%. We caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

The company’s acquisition of Applied Micro Circuits Corporation will augment MACOM’s reach in enterprise and cloud data centers and is likely to have a positive impact on its earnings in the to-be reported quarter. However, MACOM’s continuing injunction with Infineon Technologies AG over designing, making, developing, selling or marketing Gallium Nitride on Silicon is likely to affect the upcoming results.

Notably, MACOM’s results surpassed the Zacks Consensus Estimate in two out of the preceding four quarters. It has an average four-quarter positive surprise of 4.05%.

Similarly, we don’t expect Cree Inc. (NASDAQ:CREE) , to outperform estimates when it reports third-quarter fiscal 2017 results. The company is a manufacturer of semiconductors that enhance the value of solid-state lighting, power and communications products by significantly increasing their energy performance and efficiency. Cree remains focused on driving growth in its LED business.

The company has an Earnings ESP of 0.00% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Recently, Cree reached a license agreement with Ledvance, a leading manufacturer of innovative lighting products. The deal will help Cree to not only receive the ongoing royalty fees from Ledvance but will also gain the license to Ledvance’s patent portfolio without having to pay any royalty fees to the latter. Moreover, the Cree owned Wolfspeed collaboration with Ford Motor Company (NYSE:F) to develop modules could boost the efficiency of electric vehicles by up to 10%.

While these developments augur well for the company, increasing competition in the LED space, an imbalance in demand and supply of manufactured products, and a sluggish global scenario could affect its results in the to-be-reported quarter.

Notably, Cree’s results surpassed the Zacks Consensus Estimate in two out of the preceding four quarters, with an average positive surprise of 12.05%.

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