SanDisk (SNDK) Q1 Earnings: Can the Stock Surprise Again?

SanDisk Corp. SNDK is set to report first-quarter 2016 results on Apr 27. Last quarter, the company posted a positive earnings surprise of 43.84%. Moreover, the company surpassed the Zacks Consensus Estimate in three of the preceding four quarters, with an average positive surprise of 63.59%.

Let us see how things are shaping up for this announcement.

Factors to Consider

SanDisk posted better-than-expected fourth-quarter 2015 results, surpassing the Zacks Consensus Estimate on both counts. However, the year-over-year comparisons on both the counts were unfavorable, primarily because of competitive pricing pressure, unfavorable product mix and the loss of a single large customer in 2015. Moreover, the company provided tepid first-quarter revenue guidance.

Nonetheless, the strategic acquisitions of Fusion-io Inc and SMART Storage Systems are expected to expand SanDisk's offerings in the Enterprise SSD segment and boost first-quarter revenues.

Moreover, during the first quarter, the company announced the availability of two new products, SanDisk Extreme 510 Portable SSD and SanDisk X400 SSD at the International Consumer Electronics Show (CES) 2016. These products will demonstrate the company's leadership in flash-based technologies, thereby enhancing its solid state drive SSD portfolio.

The products are aimed at advancing innovation in memory technologies, which in turn will strengthen the company's product portfolio and have a positive impact on the first-quarter results.

It is also worth mentioning that SanDisk is going to be acquired by Western Digital Corp. WDC. We believe that this acquisition offers a smart exit to SanDisk's shareholders and will make Western Digital the world's largest flash storage solution provider.

Earnings Whispers

Our proven model does not conclusively show that SanDisk will beat earnings 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 43 cents. Hence, the difference is 0.00%.

Zacks Rank: SanDisk's Zacks Rank #2 when combined with a 0.00% ESP makes surprise prediction difficult.

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

Stocks to Consider

Here are some 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:

Align Technology Inc. ALGN, with an Earnings ESP of +12.82% and a Zacks Rank #1.

Boyd Gaming Corporation BYD, with an Earnings ESP of +36.0% and a Zacks Rank #1.

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BOYD GAMING CP BYD: Free Stock Analysis Report
 
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SANDISK CORP SNDK: Free Stock Analysis Report
 
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