The third-quarter 2016 earnings season has commenced on a better note than last quarter, with big banks reporting impressive results. However, growth trends are still dreary particularly due to weakness in the energy and technology sectors.
Per the latest Earnings Preview article (released on Oct 14, 2016), overall third-quarter earnings for the S&P 500 companies are expected to be down 2.2% from the year-ago quarter while revenues may see a 1.5% increase.
Earnings for the Technology sector are anticipated to be down 1.7% on 1.1% lower revenues. Apple’s guidance, which projects an earnings decline of 20.6% on 9.6% lower revenues, will deal a major blow to the sector's earnings. Excluding Apple, earnings are estimated to grow 3%.
This week, we will see earnings releases from more than 240 companies, out of which 80 are S&P 500 members.
Here is a sneak peek into two semiconductor companies lined up to report earnings on Oct 20.
In the last reported second quarter, Advanced Micro Devices, Inc. AMD delivered a positive earnings surprise of 36.4%.
Our proven model does not conclusively show that Advanced Micro will beat the Zacks Consensus Estimate in the upcoming third 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. Unfortunately, that is not the case here as elaborated below:
For the third quarter, Advanced Micro has an Earnings ESP of 0.00%. This makes surprise prediction difficult although the company has a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Management expects revenues to increase 18% sequentially (+/- 3%) driven by strong demand for Semi-Custom and Graphics products in the third quarter. Moreover, non-GAAP gross margin is likely to be 31%. (Read more: What's in Store for Advanced Micro in Q3 Earnings?)
Maxim Integrated Products, Inc. MXIM delivered a positive earnings surprise of 2.08% in the last reported fourth quarter of fiscal 2016. Also, the company outperformed the Zacks Consensus Estimate in each of the last four quarters, with an average positive surprise of 1.13%.
For the upcoming fiscal first quarter, Maxim has an Earnings ESP of 0.00% as the Most Accurate estimate and the Zacks Consensus Estimate are both pegged at 47 cents. It currently carries a Zacks Rank #4. Notably, we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stay tuned! Check back on our full write-up on earnings releases of these stocks.
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