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Semtech (SMTC) to Report Q4 Earnings: What’s in Store?

Zacks

Semtech Corporation SMTC is set to report fiscal fourth-quarter 2018 results on Mar 14. Last quarter, it posted a positive earnings surprise of 10.2%.

The company’s surprise history has been pretty impressive. It beat estimates in each of the last four quarters with an average of 6.9%.

Coming to share price movement, Semtech’s stock has returned only 0.87% in the last year, underperforming the industry’s gain of 24.9%.


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

Factors at Play

Semtech reported mixed fiscal third-quarter 2018 results with earnings beating the Zacks Consensus Estimate but revenues missing the same.

The company’s improved profitability was driven by differentiated growth drivers and diversification strategy. Key growth drivers for Semtech are product differentiation, operational flexibility, and a specific focus on fast-growing segments and regions.

In the fiscal third quarter, the company saw strong demand for high-end consumer and industrial end markets. The growing need for more efficient energy management in home and industrial settings, increasing electronic system requirements for mobile devices, and propagation of green standards will continue to drive demand in these segments.

However, weakness in the enterprise computing and communications markets could impact results. Also, concerns about the company’s exposure to seasonality, a competitive market and foreign exchange risk persist.

For fiscal fourth-quarter 2018, on a non-GAAP basis, management expects revenues in the range of $138-$142 million. This implies 7.1% sequential decline at the mid-point of the guided range.

Non-GAAP gross profit margin is expected within 61.0% and 62.0%. Management projects SG&A expenses within $26-$27million, and research and development expenses in the range of $23-$24 million. Non-GAAP earnings per share are expected to come in at 40-42 cents.

Earnings Whispers

Our proven model does not conclusively show that Semtech will beat on 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: The Earnings ESP for the company is -0.41%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank:Semtech carries a Zacks Rank #3, which when combined with a 0.00% ESP makes a surprise prediction difficult.

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.

Stocks to Consider

We see a likely earnings beat for each of the following companies:

EVINE Live Inc. EVLV has an Earnings ESP of +13.79% and Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

FactSet Research Systems Inc. FDS has an Earnings ESP of +0.18% and a Zacks Rank #3.

eBay Inc. EBAY has an Earnings ESP of +0.44% and a Zacks Rank #3.

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