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What's in Store for Synaptics (SYNA) This Earnings Season?

Synaptics Inc. SYNA is set to report fiscal first-quarter 2018 results on Nov 7. In the trailing four quarters, the company has beaten the Zacks Consensus Estimates thrice, delivering an average positive surprise of 3.48%.

Last quarter, Synaptics came up with a positive earnings surprise of 1.72%. Revenues of $427 million matched the Zacks Consensus Estimate and grew 31.8% on a year-over-year basis.

For fiscal first-quarter 2018, the company anticipates revenues in the range of $380-–$420 million.

We note that Synaptics has lost 35.5% of its value year to date against 37.1% growth of its industry.

Let’s see how things are shaping up for this announcement.

Factors at Play

Synaptics remains focused on enhancing its Automotive Solutions and Touch and Display Driver Integration (TDDI) and fingerprint portfolio. Accretive acquisitions have been a key driver in this regard.

The company’s recent acquisition of Conexant Systems and Multimedia Solutions Business of Marvell Technology Group expands its offerings in the smart home market and therefore is expected to increase its total addressable market. The company expects the acquisition of Conexant to drive gross margin in the September quarter.

Moreover, we believe that Synaptics is now well positioned to capitalize on the growing voice interface modality. On the last conference call, management noted that collaborations with leading companies like Baidu BIDU, Amazon AMZN and Harman were a positive.

However, sluggish display driver (DDIC) products business and smartphone demand in China are headwinds for Synaptics. In the last reported quarter, its revenues declined sequentially primarily due to a 6% decrease in mobile revenues as a result of continued weakness in the China mobile market.

Further, competition from Atmel, Elan Microelectronics, Focaltech Systems, Goodix remains a concern for the company.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or #3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. The Sell-rated stocks (Zacks Rank #4 or #5) are best avoided.

Synaptics has a Zacks Rank #3 and an Earnings ESP of 0.00%, which makes surprise prediction difficult. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stock to Consider

Here is a stock which, as per our model, has the right combination of elements to post an earnings beat this quarter:

Texas Instruments Incorporated TXN with an Earnings ESP of +0.42% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

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