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Can Qorvo (QRVO) Beat Q4 Earnings on Organic Growth?

Leading semiconductor manufacturer Qorvo, Inc. QRVO is scheduled to report fourth-quarter fiscal 2016 results after the closing bell on May 4. In the last reported quarter, adjusted earnings comfortably beat the Zacks Consensus Estimate by 8 cents. The company has beaten earnings estimates thrice in the last four trailing quarters with an average positive earnings surprise of 6.23%. Let’s see how things are shaping up for this announcement.

Key Factors in the Fourth Quarter

Qorvo is leveraging the core strengths of both the merged companies to rapidly translate research and development advances into large scale production. In addition, synergistic benefits from the merger is likely to increase profitability through economies of scale and mutual sharing of manufacturing expertise, research and development costs and adjustment of staffing expenses.

Qorvo has introduced highly integrated front-end solutions that simplify and accelerate the implementation of multimode, multi-band 4G smartphones and tablets. These new RF Fusion front-end solutions showcase Qorvo's ability to help leading OEMs to quickly launch their next-generation flagship devices. Qorvo's RF Flex solutions have been selected to support multiple upcoming leading 4G reference designs. RF Flex delivers best-in-class current consumption to enable superior device performance and leading-edge design flexibility to simplify regional customization.

Along with the third-quarter fiscal 2016 results, Qorvo offered a relatively bullish guidance for the fourth quarter as well. Revenues for fourth-quarter fiscal 2016 were expected to increase on a sequential basis to approximately $600 million, while earnings per share were expected in the range of 90-95 cents.  

New product launches and customer design activity are likely to drive revenue growth in the to-be-reported quarter. The company is likely to expand its leadership in filter solutions owing to the release of the industry’s first six-inch TC-SAW wafers in Florida, six-inch SAW wafers in North Carolina and demonstration of its first eight-inch BAW wafers in Texas. During the quarter, the company also launched its High Power Plastic Packaged GaN MMICs which are expected to augment its revenues in the future.

Earnings Whispers

Our proven model shows that Qorvo is likely to beat earnings this quarter as it possesses the key components. 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. This is perfectly the case here as you will see below:

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is currently +2.90%. This indicates a likely earnings beat.

Zacks Rank: Qorvo’s Zacks Rank #3 when combined with a +2.90% ESP makes us fairly confident of a positive earnings surprise.

On the other hand, the Sell-rated stocks (#4 and #5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Other Stocks to Consider

Here are some other companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Baytex Energy Corp. BTE has an Earnings ESP of +29.41% and carries a Zacks Rank #3

Cobalt International Energy, Inc. CIE has an Earnings ESP of +9.09% and holds a Zacks Rank #3.

Garrison Capital Inc. GARS has an Earnings ESP of +6.25% and holds a Zacks Rank #3.

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
QORVO INC (QRVO): Free Stock Analysis Report
GARRISON CAPITL (GARS): Free Stock Analysis Report
BAYTEX ENERGY (BTE): Free Stock Analysis Report
COBALT INTL EGY (CIE): Free Stock Analysis Report
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