Cirrus Logic Inc. (NASDAQ:CRUS) is set to report first-quarter fiscal 2017 results on Jul 27. Last quarter, the company posted a positive earnings surprise of 92.9%. Let us see how things are shaping up for this announcement.
Factors at Play
Cirrus Logic is a premier supplier of high-performance analog circuits and advanced mixed-signal chip solutions. The company posted better-than-expected fourth-quarter fiscal 2016 results. The year-over-year comparisons were however unfavorable.
Notably, as per revenue segments, Portable audio product revenues accounted for approximately 80% of the total revenue last quarter. Also, Cirrus Logic generates a significant portion (approximately 70%) of its revenues from Apple Inc. (NASDAQ:AAPL) . This means that there is always a risk of losing an Apple design contract, which will significantly hurt the company’s financials.
We remain cautious about the company as the current global economic downturn might affect its business potential, going forward. Moreover, the company faces competition from the likes of Texas Instruments (NASDAQ:TXN) Inc. and STMicroelectronics, which remains a headwind.
Nonetheless, continued investments in the audio segment are expected to have a positive impact in the long run.Additionally, synergies from acquisitions and expansion in the LED market continue to drive growth.
Earnings Whispers?
Our proven model does not conclusively show that Cirrus Logic will beat earnings 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 stand at 17 cents. Hence, the difference is 0.00%.
Zacks Rank: Cirrus Logic’s Zacks Rank #3 when combined with a 0.00% ESP makes surprise prediction difficult.
We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Stocks to Consider
Here are a couple of companies, which, as per our model, have the right combination of elements to post an earnings beat this quarter:
Garmin Ltd. (NASDAQ:GRMN) with an Earnings ESP of +4.48% and a Zacks Rank #3
Amazon.com, Inc. (NASDAQ:AMZN) with Earnings ESP of +37.72% and a Zacks Rank #3
AMAZON.COM INC (AMZN): Free Stock Analysis Report
APPLE INC (AAPL): Free Stock Analysis Report
CIRRUS LOGIC (CRUS): Free Stock Analysis Report
GARMIN LTD (GRMN): Free Stock Analysis Report
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