Will Semtech (SMTC) beat estimates again in its next earnings report?

If you’re looking for a stock that has a solid history of beating earnings estimates and is well-positioned to continue the trend in its next quarterly report, you should consider Semtech (SMTC). This stock, which operates in the Zacks Semiconductor – Analog and Mixed industry, shows potential for another earnings beat.

This chipmaker has seen a nice streak of beating earnings estimates, especially looking at the previous two reports. The average surprise for the last two quarters was 2.76%.

For the most recent quarter, Semtech was expected to post earnings of $0.63 per share, but instead reported earnings of $0.65 per share, representing a surprise of 3.17%. The consensus estimate for the prior quarter was $0.85 per share when it actually delivered $0.87 per share, representing a surprise of 2.35%.

Price and EPS surprise

With this earnings history in mind, recent estimates for Semtech are getting higher. In fact, the company’s Zacks Earnings ESP (expected surprise) is positive, which is a great sign of earnings growth, especially when you combine this metric with a nice Zacks Rank.

Our research shows that stocks with the combination of a positive Earnings ESP and a Zacks Rank #3 (Hold) or better produce a positive surprise nearly 70% of the time. In other words, if you have 10 stocks in this combination, the number of stocks that beat the consensus could be as high as seven.

The Zacks Earnings ESP compares the Most Accurate Estimates to the Zacks Consensus Estimates for the quarter; The Most Accurate Estimate is the Zacks Consensus version, which is defined in terms of change. The idea is that analysts reviewing their estimates just before an earnings release have the latest information, which could potentially be more accurate than what they and other consensus participants had previously predicted.

Currently, Semtech’s earnings ESP is +0.70%, which suggests analysts have become optimistic about its near-term earnings potential. When you combine this positive Earnings ESP with the stock’s Zacks Rank #3 (Hold), it shows that another rally is likely just around the corner. The company’s next earnings report is expected to be released on March 29, 2023.

For the Earnings ESP metric, remember that a negative value reduces its predictive power; however, a negative earnings ESP does not mean a loss of earnings.

Many companies end up beating consensus EPS estimates, but that may not be the only basis for their stock’s rise. On the other hand, some stocks may hold even if they fall short of the consensus price.

For this reason, it is very important to check a company’s earnings ESP before its quarterly release to increase the chances of success. Use our Earnings ESP filter to find the best stocks to buy or sell before they report.

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