Will Advanced Micro (AMD) Disappoint This Earnings Season? - Analyst Blog

Advanced Micro Devices, Inc. (NYSE: AMD) is set to report first-quarter 2014 results on Apr 17. Last quarter, it posted in-line results. Let's see how things are shaping up for this announcement.

Growth Factors this Past Quarter

Advanced Micro's fourth-quarter earnings of 6 cents were in line with the Zacks Consensus Estimate due to higher revenues. Revenues were up 8.8% sequentially and 37.6% year over year. The solid growth was driven by strong performance in the Graphics and Visual Solutions segment, higher revenues from semi-custom System-on-Chips (SoCs) and ramp up of the new R7 and R9 series of GPU products.

However, gross margins of 34.8% decreased sequentially but were up significantly from the year-ago quarter. The sequential decrease was due to unfavorable mix and higher-than-expected operating expenses.

For the first quarter, AMD expects revenues to decrease 16.0% (+/- 3.0%) sequentially. Non-GAAP gross margin is expected to be 35.0%. Operating expenses are expected to be approximately $420.0 million.

Earnings Whispers?

Our proven model does not conclusively show that AMD will beat earnings 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 0 cent. Therefore, the ESP for the stock is 0.00%.

Zacks Rank: AMD sports a Zacks Rank #1 (Strong Buy) which 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

You could consider other stocks with a positive Earnings ESP and Zacks Rank #1, 2 or 3 such as:

E-Commerce China Dangdang Inc. (NYSE: DANG), with Earnings ESP of +33.33% and a Zacks Rank #1 (Strong Buy).

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

Yelp, Inc. (NYSE: YELP), with Earnings ESP of +33.33% and a Zacks Rank #2 (Buy).


 
ADV MICRO DEV (NYSE: AMD): Free Stock Analysis Report
 
E-COMMRC CH-ADR (NYSE: DANG): Free Stock Analysis Report
 
ON SEMICON CORP (NASDAQ: ONNN): Free Stock Analysis Report
 
YELP INC (NYSE: YELP): Free Stock Analysis Report
 
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