Tessera Technologies (TSRA) Q2 Earnings: What's In Store?

Tessera Technologies Inc. (NASDAQ:TSRA) is set to report second-quarter 2016 results on Aug 2. Last quarter, the company posted a 10.26% positive earnings surprise.

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

Factors at Play

Tessera posted encouraging first-quarter results in terms of revenues as well as earnings.

Increased technical collaboration, channelized investment toward potential growth areas and patent licensing agreements are positives. The product portfolio has also been revamped to target the mobile segment, which should help growth.

Tessera continues to witness improvement with FotoNation imaging group that recorded highest ever quarterly revenues last quarter. These developments and Tessera’s premium imaging technology indicate that the business will grow significantly in the mobile and adjacent markets.

The company’s internal R&D efforts, Invensas semiconductor packaging and Ziptronix initiatives continue to make solid progress and are expected to drive growth.

Its recent deal with ASE also has tremendous potential. However, protection of IP, its pricing strategy and customer concentration remain risks.

For the second quarter, Tessera expects revenues in a range of $64 million–$66 million. GAAP earnings per share are expected between 42 cents and 44 cents, and non-GAAP earnings per share within 54-56 cents.

Earnings Whispers

Our proven model does not conclusively show that Tessera will beat estimates this quarter. This 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 50 cents. Therefore, its Earnings ESP is 0.00%.

Zacks Rank: Tessera’s Zacks Rank #3 when combined with a 0.00% ESP makes surprise prediction difficult.

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

Stocks to Consider

Here are some stocks, which you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Avista Corp. (NYSE:AVA) with an Earnings ESP of +2.33% and Zacks Rank #2.

Alibaba Group Holding Limited (NYSE:BABA) with an Earnings ESP of +28.95% and Zacks Rank #3.

Charter Communications, Inc. (NASDAQ:CHTR) , with an Earnings ESP of +404.76% and a Zacks Rank #3.