Yahoo Finance What's in Store for Maxim Integrated (MXIM) in Q2 Earnings?
Maxim Integrated Products, Inc. MXIM is set to report second-quarter fiscal 2016 results on Jan 21. Last quarter, the company posted a 2.44% positive earnings surprise.
Let’s see how things are shaping up for this announcement.
Factors to Consider
Maxim delivered mixed fiscal first-quarter results with earnings surpassing the Zacks Consensus Estimate but revenues missing the same. Higher earnings were primarily attributable to a stronger automotive business, lower operating expenses and a slightly lower tax rate.We expect the strong demand trend in the automotive business to continue in the second quarter.
Margins were up 75 basis points sequentially but remained flat year over year. The sequential increase was driven by lower manufacturing expenditure. Of late, the company has been developing technology based on advanced process nodes in collaboration with its foundry partners. Products developed under this initiative should expand margins.
The company is also taking steps to restructure operations by discontinuing investment in MEMS and touch lines of business. These cost-management initiatives will increase its profitability and drive margins. Also, the company is focusing on manufacturing and R&D to boost margins.
For the second quarter, Maxim expects revenues in the range of $490 million to $520 million based on a quarter-end backlog of $329.0 million. Earnings per share are projected within 23–29 cents on a GAAP basis and 29–35 cents on an adjusted basis.
Earnings Whispers
Our proven model does not conclusively show that Maxim will beat estimates 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: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 32 cents. Therefore, the Earnings ESP for the stock is 0.00%.
Zacks Rank: Maxim’s Zacks Rank #3 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
You can consider the following stocks, which have a favorable combination of a positive Earnings ESP and a favorable Zacks Rank:
Gilead Sciences Inc. GILD, with an Earnings ESP of +5.86% and a Zacks Rank #1.
Ethan Allen Interiors Inc. ETH, with an Earnings ESP of +9.30% and a Zacks Rank #2.
Jack Henry & Associates Inc. JKHY, with an Earnings ESP of +2.99% and a Zacks Rank #2.
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