Electronics Stocks Due for Earnings on May 8: CUB, FN, HOCPY

The Q1 earnings season is drawing to a close with nearly 71.6% or 358 S&P 500 members having released their earnings reports as of May 3, 2017.

As per the latest Earnings Preview, total earnings of these 358 companies are up 12.9% on a year-over-year basis (74.3% of the companies beat EPS estimates), while total revenue is up 7.9% (65.9% of the companies beat top-line estimates). These companies have not only managed to show improvement in earnings and revenues, but also most of them have surpassed expectations.

Overall first-quarter earnings for the S&P 500 companies are anticipated to be up 11.9% from the year-ago quarter on revenues that are estimated to increase 6.2%. This will be better than the 7.4% growth in fourth-quarter earnings on 4.8% higher revenues.

Technology Earnings Soar

Investors seem to be rejoicing as most of the companies in the technology sector have surpassed estimates. Also, growth rate is up from the preceding quarter and is on track to reach its highest level in almost three years. Continuation of these trends through the rest of this earnings season should serve as a reassuring development for the market.

We note that almost 74.4% of the total market capitalization in the technology sector has reported till now. Total earnings are up 14.4% on a year-over-year basis (80.6% of the companies beat EPS estimates), while total revenue is up 5.7% on a year-over-year basis (77.8% of the companies beat top-line estimates).

Stocks to Watch Out for Earnings on May 8

Let’s take a sneak peek into three electronic companies that are set to report their quarterly results on May 8.

Cubic Corporation CUB is the parent company of two major business segments – defense and transportation. The Cubic Defense Applications group is a world leader in realistic combat training systems, mission support services and defense electronics. Cubic Transportation Systems designs and manufactures automatic fare collection systems for public transit authorities.

The company is unlikely to beat second-quarter fiscal 2017 earnings estimates as it has a Zacks Rank #3 (Hold) and an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

As per our proven model, a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 to beat estimates. We caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is witnessing negative estimate revisions.

Notably, Cubic Corporation’s results compared unfavorably with the Zacks Consensus Estimate in each of the last four quarters, with an average negative surprise of 199.28%. Last quarter, the company posted a 450% negative surprise.You can see the complete list of today’s Zacks #1 Rank stocks here.

Cubic Corporation Price and EPS Surprise

 

Cubic Corporation Price and EPS Surprise | Cubic Corporation Quote

Similarly, Fabrinet FN is unlikely to post an earnings beat when it reports third-quarter fiscal 2017 results. Fabrinet is a provider of precision optical, electro-mechanical and electronic manufacturing services to original equipment manufacturers.

This is because the company has an Earnings ESP of +6.76% but a Zacks Rank #4. Though a positive ESP increases the chances of a company pulling off an earnings beat, we caution against stocks with a Zacks Rank #4 or 5 going into the earnings announcement.

The surprise history is also not good in Fabrinet’s case. The company missed the Zacks Consensus Estimate in each of the preceding four quarters, with an average negative surprise of 5.01%.

Fabrinet Price and EPS Surprise

 

Fabrinet Price and EPS Surprise | Fabrinet Quote

We also don’t expect HOYA Corporation HOCPY to post an earnings beat when it reports fourth-quarter fiscal 2017 results. The company is a specialty manufacturer of optical glass. The company's business activities include information technology, eye care, medical and imaging systems.

This is because the company has an Earnings ESP of 0.00% and a Zacks Rank #3.

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