We expect technology licensing company Rambus Inc. (RMBS) to beat expectations when it reports second quarter 2013 results on Jul 18.
Why a Likely Positive Surprise?
Our proven model shows that Rambus is likely to beat earnings because it has the right combination of two key ingredients.
Positive Zacks ESP: Expected Surprise Prediction or ESP (Read: Zacks Earnings ESP: A Better Method), which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is at +9.09%. This is very meaningful and a leading indicator of a likely positive earnings surprise for shares.
Zacks Rank #1 (Strong Buy): Note that stocks with Zacks Ranks of #1, #2 and #3 have a significantly higher chance of beating earnings. The sell rated stocks (#4 and #5) should never be considered going into an earnings announcement.
The combination of Rambus' Zacks Rank # 1 (Strong Buy) and +9.09% ESP makes us very confident in looking for a positive earnings beat on Jul 18.
What is Driving the Better Than Expected Earnings?
We believe that Rambus has had a great quarter. Rambus has signed a two-way licensing agreement with European chip-making company STMicroelectronics. Both the companies will use each other's patented technologies for excelling in their core areas. Apart from this, the deal puts an end to the decade-long legal battle between the two companies and also keeps the doors open for further collaborations.
Apart from STMicro, Rambus settled legal disputes with South Korean memory chip-making company SK Hynix and signed a patent licensing agreement.
Also, Rambus is adding features to its LED (light emitting diodes) portfolio and is on its way to capitalize on the growing popularity of energy-efficient lighting.
Rambus has surpassed estimates in the past four trailing quarters, which resulted in an average positive surprise of 176.85%.
Other Stocks to Consider
Apart from Rambus, we also expect earnings beat ! from the following stocks.
SanDisk Corp. (SNDK), Earnings ESP of +4.55% and Zacks Rank #1 (Strong Buy).
Huron Consulting Group Inc. (HURN), Earnings ESP of +1.64% and Zacks Rank #2 (Buy).
Gartner Inc. (IT), Earnings ESP of +1.96% and Zacks Rank #2 (Buy).