Will Broadcom (AVGO) Keep The Earnings Streak Alive In Q4?
Zacks Investment Research | Dec 05, 2016 04:35AM ET
We expect Broadcom Limited (NASDAQ:AVGO) to beat expectations when it reports fourth-quarter fiscal 2017 results on Dec 8.
Why a Likely Positive Surprise?
Our proven model shows that Broadcom is likely to beat earnings because it has the right combination of two key ingredients.
Zacks ESP: Broadcom’s
Note that stocks with a Zacks Rank #1 (Strong Buy), #2 or #3 (Hold) has a significantly higher chance of beating earnings estimates. Conversely, Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.
The combination of Broadcom’s +1.73% ESP and Zacks Rank #2 makes us reasonably optimistic of an earnings beat.
What's Driving the Better-than-Expected Earnings?
Broadcom’s extensive product portfolio serves multiple applications within four primary end markets – wired infrastructure, wireless communications, enterprise storage, and industrial & others. The company’s focus on multiple target markets and geographies mitigates operating risks and lessens its exposure to volatility in any single market.
BROADCOM LTD Price and EPS Surprise
Notably, Broadcom has beaten earnings estimates in each of the last four quarters with an average positive earnings surprise of 7.00%. However, the company’s return of 13.14% compared unfavorably with the Zacks Elec-Semiconductors Industry’s gain of 38.77% on a year-to-date basis.
Nevertheless, we believe the stock will rebound going ahead driven by its strong product portfolio, impressive pipeline and continuing cost-synergy realization from the Avago merger. Moreover, the IT platform integration is expected to help lower operating expenses.
Early November, the company revised its revenue outlook, which is now anticipated to be in the range of $4.100 billion to $4.175 billion. GAAP gross margin is still projected at 60.5% (+/- 1%), while operating expenses are estimated to be approximately $108 million.
Management expects wired revenues to remain flat sequentially, as the company tries to resolve supply constraints. Wireless revenues are anticipated to surge more than 30% on a quarter-over-quarter basis. Enterprise storage is anticipated to grow in the low single digits sequentially driven by positive end-market seasonality.
Get The News You Want
However, industrial revenues are expected to decline 20% sequentially due to lower channel shipments as the company heads toward the seasonally weaker part of the calendar year.
Other Stocks to Consider
Here are some companies you may consider as our proven model shows they too have the right combination of elements to post an earnings beat this quarter:
Asure Software (NASDAQ:ASUR) has an Earnings ESP of +12.5%. It sports a Zacks Rank #1.
Marvell (NASDAQ:MRVL) also sports Zacks Rank #1 and has an Earnings ESP of +8.33%.
Micron Technology (NASDAQ:MU) , with an Earnings ESP of +4.17%, flaunts a Zacks Rank #1.
The Best Place to Start Your Stock Search
Today, you are invited to download the full list of 220 Zacks Rank #1 "Strong Buy" stocks – absolutely free of charge. Since 1988, Zacks Rank #1 stocks have nearly tripled the market, with average gains of +26% per year. Plus, you can access the list of portfolio-killing Zacks Rank #5 "Strong Sells" and other private research. Zacks Investment Research
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.