Advanced Micro Devices, Inc. (AMD) is set to report fourth-quarter 2014 results on Jan 20. Last quarter, the company posted 25.0% negative surprise. Let’s see how things are shaping up for this announcement.

Factors to Consider

Advanced Micro’s third-quarter earnings of 3 cents missed the Zacks Consensus Estimate by a penny due to weak consumer PC market. Also, revenues were down sequentially due to lower chipset and GPU sales, partially offset by strong sales of semi-custom System-on-chips (SoCs).

Margins of 34.6% were flat sequentially but down 110 bps from the year-ago quarter due to unfavorable product mix.

For the fourth quarter, management expects revenues to decrease 13% sequentially (+/- 3%), due to lower semi-custom revenues and weak consumer PC environment. Non-GAAP gross margin is expected to be 35%. Operating expenses are estimated to be approximately $385.0 million and interest expense nearly $46 million.

Earnings Whispers?

Our proven model does not conclusively show that Advanced Micro will beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 0 cent. Hence, the difference is 0.00%.

Zacks Rank: Advanced Micro carries a Zacks Rank #4 (Sell).

We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Stocks to Consider

You could consider the following stocks with a positive Earnings ESP and a favorable Zacks Rank:

The Allstate Corporation (ALL), with an Earnings ESP of +3.05% and a Zacks Rank #1 (Strong Buy).

MGIC Investment Corp. (MTG), with an Earnings ESP of +35.71% and a Zacks Rank #1.

Wabash National Corp. (WNC), with an Earnings ESP of +4.35% and a Zacks Rank #1.

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ADV MICRO DEV (AMD): Free Stock Analysis Report
 
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