Synaptics (SYNA) To Report Q2 Earnings: What's In Store?

Synaptics Inc. (NASDAQ:SYNA) is set to report fiscal second-quarter 2018 results on Feb 7. The company beat the Zacks Consensus Estimate in each of the trailing four quarters, delivering an average positive surprise of 6.03%.

Last quarter, the company reported earnings of $1.03 per share, up 7.3% from the year-ago quarter and beat the Zacks Consensus Estimate of 94 cents per share. Revenues of $417 million beat the Zacks Consensus Estimate and grew 8% on a year-over-year basis.

For fiscal second-quarter 2018, the company anticipates revenues in the range of $410-–$450 million.

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

Factors at Play

Synaptics remains focused on enhancing its Automotive Solutions and Touch and Display Driver Integration (TDDI) and fingerprint portfolio. Accretive acquisitions have been a key driver in this regard.

The company’s acquisition of Conexant Systems and Multimedia Solutions Business of Marvell Technology Group is helping it to diversify its business, expand customer base and increase its total addressable market.

The company has a very strong lineup of customers, which include Apple (NASDAQ:AAPL) , Xiaomi, Samsung (KS:005930), Huawei and Lenovo among others. Its partnership with Huawei has greatly expanded its offerings.

On the last earnings call, management noted that its Natural ID fingerprint sensors are gaining traction among major smartphone providers. The company’s TouchView TDDI product line is helping in the expansion of its mobile business.

Synaptics is also well positioned to capitalize on significant growth opportunities in the consumer IoT business. Its AudioSmart, ImagingSmart and VideoSmart are gaining wide scale adoption.

However, sluggish display driver (DDIC) products business and smartphone demand in China are headwinds for Synaptics.

Further, competition from Atmel, Elan Microelectronics, Focaltech Systems, Goodix remains a concern for the company. Increase in operating expenses, given the costs incurred for acquisitions, will weigh on the bottom line.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. The Sell-rated stocks (Zacks Rank #4 or 5) are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Synaptics has a Zacks Rank #3 and its Earnings ESP is +2.53%. Therefore, the company is likely to deliver a positive surprise this quarter.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Some Other Stocks With a Favorable Combination

Here are a couple of companies which, as per our model, have the right combination of elements to post an earnings beat this quarter:

NVIDIA Corporation (NASDAQ:NVDA) has an Earnings ESP of +6.87% and a Zacks Rank of 2.

Vishay Intertechnology, Inc. (NYSE:VSH) , with an Earnings ESP of +6.19% and a Zacks Rank of 2.

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