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NVIDIA (NVDA) to Report Q2 Earnings: What’s in the Cards?


NVIDIA Corporation NVDA is set to report second-quarter fiscal 2018 results on Aug 10. Last quarter, the company posted a positive earnings surprise of 24.2%. Additionally, NVIDIA surpassed the Zacks Consensus Estimate in all the trailing four quarters, with an average positive surprise of 27%.

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

Factors to Consider

Widely known for its video gaming chips, NVIDIA has pioneered the art and science of visual computing. With singular focus on this field, the company offers specialized platforms for the gaming, automotive, data center and professional visualization markets. Its products, services and software deliver amazing experiences in virtual reality, artificial intelligence and autonomous cars.

We believe that NVIDIA’s innovative product pipeline and strength in gaming and high-end notebook GPUs keep it well positioned. We also feel that the higher adoption of NVIDIA’s Tegra processors could act as a catalyst, going forward.

On the flip side, the secular decline in the PC market has affected many chip makers. NVIDIA’s dependence on the PC market continues and therefore is being hurt by adverse conditions. The preliminary data released by Gartner showed that PC shipments in the second quarter were down 4.3% year over year to 61.1 million units. The decline marked the 11th straight quarter of year-over-year fall, which is the longest duration of decline in the history of the PC industry.

Also, Gartner’s forward-looking statements make us a shade cautious about the prospects of the PC industry. The research firm agreed that the recent surge in DRAM prices and short supply of SSD will lead to an increase in PC prices. This makes us slightly cautious about NVIDIA’s near-term performance.

Additionally, competition from the likes of Intel INTC and QUALCOMM Inc. remains a near-term headwind.

NVIDIA Corporation Price and EPS Surprise

NVIDIA Corporation Price and EPS Surprise | NVIDIA Corporation Quote

Earnings Whispers

Our proven model does not conclusively show that NVIDIA is likely to beat the Zacks Consensus Estimate this time around. 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, this is not the case here as elaborated below.

Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 69 cents. Hence, the difference is 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter

Zacks Rank: NVIDIA carries a Zacks Rank #2. Though a Zacks Rank #1, 2 or 3 increases the predictive power of ESP, the company’s ESP of 0.00% makes surprise prediction difficult.

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

Stocks that Warrant a Look

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

Alibaba Group Holding Limited BABA, scheduled to release earnings on Aug 10, currently has an Earnings ESP of +4.11% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Broadcom Limited AVGO, expected to release earnings on Aug 24, currently has an Earnings ESP of +2.57% and a Zacks Rank #2.

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