Xilinx (XLNX) to Report Q2 Earnings: What's in Store?

Xilinx Inc. XLNX is set to report second-quarter fiscal 2016 results on Oct 14. Last quarter, the company posted a positive earnings surprise of 3.8%. Let's see how things are shaping up for this announcement.

Factors to Consider

Xilinx reported mixed first-quarter fiscal 2016 results wherein the bottom line beat the Zacks Consensus Estimate but the top line missed the same. Also, year-over-year comparisons on both the counts were unfavorable. Revenues declined primarily due to dismal sales at its Communications & Data Center division.

We remain cautious of the company's near-term prospects due to persistent weakness in the wireless communication market. The weakness is primarily the result of a decline in capital spending by enterprises.

Moreover, delay in China LTE deployments and higher spending on research and development, and selling, general and administrative activities could impact the company's near-term results. Also, stiff competition from Altera Corp. ALTR remains a headwind.

Earnings Whispers

Our proven model does not conclusively show that Xilinx is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here, as you will see below.

Zacks ESP: Earnings ESP for Xilinx is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 46 cents.

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

Stocks to Consider

Here are a couple of 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 Micro Devices, Inc. AMD, with an Earnings ESP of +41.67% and a Zacks Rank #3 (Hold)

Microsoft Corporation MSFT, with an Earnings ESP of +1.72% and a Zacks Rank #3

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