Semiconductor stocks’ quarterly releases are expected to reflect the negative impact of declining memory prices (both DRAM and NAND) and imposition of tariffs owing to the U.S.-China trade war.
Moreover, Huawei ban and sluggishness in chip demand from smartphone OEMs, is likely to have affected the concerned stocks in fourth-quarter 2019.
However, semiconductor space is likely to have benefited from strengthening data center market and improving trend in PC shipments.
Particularly, accelerated deployment of 5G and rapid proliferation of IoT is likely to have benefited semiconductor companies involved in providing advanced 5G chipsets and robust AI-based chips.
Per the latest Earnings Preview, the semiconductor industry, which accounts for almost a sixth of the technology sector’s total earnings, has been dragging down the entire sector. However, year-over-year earnings declines have started decelerating.
Q4 Performance of Semiconductor Stocks so Far
So far, impressive earnings beat delivered by Intel INTC, Teradyne TER and STMicroelectronics buoys optimism.
Intel is riding on solid fourth-quarter performance. The semiconductor giant benefited from growth in the data-centric businesses, driven by robust adoption of high-performance products, including Xeon Scalable processors.
Further, STMicroelectronics’ both earnings and revenues surpassed estimates in the fourth quarter. The better-than-expected performance can be attributed to improving market conditions, and growing adoption of digital ASICs and secure microcontrollers.
Teradyne delivered stellar fourth-quarter 2019 results, reflecting year-over-year growth in earnings and revenues. Higher-than-expected memory and wireless test demand, and continued growth in 5G infrastructure test spending favored results.
Meanwhile, Texas Instruments TXN fourth-quarter 2019 earnings and revenues surpassed the corresponding Zacks Consensus Estimate. However, persistent weakening in end-market conditions led to sluggishness in the company's Analog and Embedded Processing segments. This, in turn, hurt the top line.
What to Expect?
Given this backdrop, investors interested in the semiconductor domain will keenly await upcoming quarterly reports from notable players including Advanced Micro Devices AMD, Xilinx XLNX and Maxim Integrated Products MXIM on Jan 28.
It will be interesting to see if AMD’s earnings report can emulate Intel’s results. Robust adoption of latest Ryzen, Radeon and EPYC server processors in the PC, gaming, cloud, HPC and data center verticals, is expected to get reflected in AMD’s fourth-quarter performance.
According to the Zacks model, the combination of a positive Earnings ESP and Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat.
AMD has an Earnings ESP of 0.00% and a Zacks Rank #3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Advanced Micro Devices, Inc. Price and EPS Surprise
Advanced Micro Devices, Inc. price-eps-surprise | Advanced Micro Devices, Inc. Quote
Notably, the Zacks Consensus Estimate for earnings has been steady over the past 30 days at 30 cents per share. (Read more: AMD to Report Q4 Earnings: What's in the Cards for the Stock?)
Xilinx’s third-quarter fiscal 2020 top line is likely to have benefited from significant contributions from storage and networking customers, including those from Solarflare.
However, the suspension of shipments to Huawei due to the export ban imposed by the U.S. government is likely to have dented the company’s revenues.
In the last quarter’s earnings call, management announced that it anticipates Wired and Wireless Group (WWG) business to be down significantly in the fiscal third quarter due to no revenue expectation from Huawei.
Notably, Xilinx has an Earnings ESP of 0.00% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Xilinx, Inc. Price and EPS Surprise
Xilinx, Inc. price-eps-surprise | Xilinx, Inc. Quote
Markedly, the Zacks Consensus Estimate for earnings has been stable over the past 30 days at 64 cents per share. (Read more: Xilinx to Post Q3 Earnings: What's in the Offing?)
Maxim Integrated Products’ second-quarter fiscal 2020 results are expected to have benefited from the positive impact of strengthening content in driver assistance space.
However, sluggish auto production, smartphone market weakness and Huawei ban are anticipated to have negatively impacted the second-quarter results.
It has an Earnings ESP of 0.00% and a Zacks Rank #4 (Sell).
Maxim Integrated Products, Inc. Price and EPS Surprise
Maxim Integrated Products, Inc. price-eps-surprise | Maxim Integrated Products, Inc. Quote
Notably, the Zacks Consensus Estimate for earnings has been steady over the past 30 days at 53 cents per share.
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