Can Texas Instruments (TXN) Surprise This Earnings Season?

Texas Instruments TXN, or "TI,” is set to report second-quarter 2014 results on Jul 21. Last quarter, the company posted a 7.3% positive surprise. Let's see how things are shaping up for this announcement.

Factors this Past Quarter

TI's first-quarter earnings surpassed the Zacks Consensus Estimate driven by an improving mix of business and efficient cost control. However, revenues were down 1.5% sequentially but up 3.4% year over year. Distributor resales jumped 10% from last year.

TI's gross margin of 53.9% was down 29 basis points (bps) sequentially but up 625 bps from the year-ago quarter. Lower volumes led to the sequential decline.

For the second quarter of 2014, TI expects revenues within $3.14–$3.40 billion. Earnings per share are expected in the range of 55–63 cents, the mid-point of 59 cents being in line with the Zacks Consensus Estimate.

Earnings Whispers?

Our proven model does not conclusively show that Texas Instruments 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 59 cents. Hence, the difference is 0.00%.

Zacks Rank: Texas Instrument has a Zacks Rank #2 (Buy) which when combined with a 0.00% ESP makes surprise prediction difficult.

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 momentum.

Other Stocks to Consider

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

Gentex Corp. GNTX, with an Earnings ESP of +2.08% and a Zacks Rank #1 (Strong Buy).

AmSurg Corp. AMSG, with an Earnings ESP of +3.13% and a Zacks Rank #1.

Kirby Corporation KEX, with an Earnings ESP of +3.08% and a Zacks Rank #1.