Will Netgear's (NTGR) Earnings In Q2 Spring A Surprise?

Netgear Inc. (NASDAQ:NTGR) is set to report second-quarter 2016 results on Jul 27. Last quarter, the company posted a positive earnings surprise of 25.00%. The company has posted an average positive earnings surprise of 19.08% over the past four quarters.

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

NETGEAR INC Price and EPS Surprise

Factors to Consider

Netgear designs technologically advanced, branded networking products that address the specific needs of small business and home users.

We believe that Netgear’s strength in its retail business will primarily drive results. Additionally, a strong product portfolio, comprising offerings like Arlo smart home security-cameras and Nighthawk routers and gateways, is expected to boost the top line going forward. Region wise, North America continues to be a stronghold.

However, the service provider business continues to pose challenges as the company continues to streamline this segment. In the first quarter, segment revenues plunged as much as 27% year over year.

For the second quarter, the company expects revenues of $290 million to $305 million. Non GAAP operating margin is expected to be around 9.5% to 10.5%.

Earnings Whispers

Our proven model does not conclusively show that Netgear is likely to 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. This is not the case here as you will see below.

Zacks ESP: Netgear currently has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 50 cents per share.

Zacks Rank: Netgear has a Zacks Rank #3, which 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 momentum.

Stocks to Consider

Here are a few stocks that, as per our model, have the right combination of elements to post an earnings beat this quarter:

Innoviva, Inc. (NASDAQ:INVA) with an Earnings ESP of +25.00% and a Zacks Rank #1.

GoDaddy Inc. (NYSE:GDDY) with an Earnings ESP of +50.00% and a Zacks Rank #3.

Expedia Inc. (NASDAQ:EXPE) with an Earnings ESP of +6.82% and a Zacks Rank #3.