Will Maxim (MXIM) Miss Earnings Estimates? - Analyst Blog

Maxim Integrated Products, Inc. MXIM is set to report third-quarter fiscal 2014 results on Apr 24. Last quarter, it posted a 10.0% negative surprise. Let's see how things are shaping up for this announcement.

Growth Factors This Past Quarter

Maxim posted mixed second quarter results with the bottom line surpassing the Zacks Consensus Estimate while the top line missed the same. The sequential revenue increase of 6.0% was primarily due to the acquisition of Volterra. The acquisition helped the company's Computing business to contribute 17.0% of revenues compared with 12.0% in the prior quarter.

Of late, Maxim has increased its focus on the faster-growing consumer and computing end markets. Maxim has focused its efforts on mid-range smartphones because the high end of the market is seeing growth slow down. This seems like a good strategy considering the fact that most of the future growth is likely to come from emerging markets.  

Furthermore, Maxim has been on the lookout to expand beyond smartphones to game consoles, tablets and e-readers. All these efforts are aimed at extending its foothold in various new spheres.

For the third quarter, Maxim expects revenues in a range of $590–$620 million. Backlog is expected to be $366.0 million. While the GAAP gross margin is expected be in the 56%–58% range, GAAP earnings are expected to be in the range of 37 cents – 41 cents.

Earnings Whispers?

Our proven model does not conclusively show that Maxim will beat estimates this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 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 39 cents. Hence, the difference is 0.00%.

Zacks Rank: Maxim's Zacks Rank #3 (Hold), when combined with a 0.00% ESP makes surprise prediction difficult.

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

Other Stocks to Consider

Here are some other companies, which you may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Advanced Energy Industries, Inc. AEIS, with Earnings ESP of +10.00% and a Zacks Rank #1 (Strong Buy).

E-Commerce China Dangdang Inc. DANG, with Earnings ESP of +33.33% and a Zacks Rank #1.

ON Semiconductor Corp. ONNN, with Earnings ESP of +6.67% and a Zacks Rank #1.