Will Microsemi (MSCC) Disappoint This Earnings Season? - Analyst Blog

Microsemi Corporation MSCC is set to report second-quarter fiscal 2014 results on Apr 24. Last quarter, it posted a 5.7% positive surprise. Let's see how things are shaping up for this announcement.

Growth Factors This Past Quarter

Microsemi posted decent fiscal first quarter 2014 results with both the top and bottom lines beating the Zacks Consensus Estimate. The Communications market, which constituted 38% of Microsemi's quarterly revenues, was particularly strong. Strength was driven by Power over Ethernet (PoE) wireless products, which found application in several new markets acted as a catalyst. Also, strengthening telecom spending worldwide, including emerging markets such as China and India are benefiting the company.

The company also launched several new products that should help it increase penetration in existing markets and expand into new ones. This, along with its improving end markets will boost its market share.

For the second quarter, Microsemi expects revenues to increase 10%–14% sequentially. Gross margins are expected in the range of 54.5%–55.5% and non-GAAP earnings per share are expected to be around 48 cents–54 cents per share.

Earnings Whispers?

Our proven model does not conclusively show that Microsemi 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 41 cents. Hence, the difference is 0.00%.

Zacks Rank: Microsemi'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.