Teradyne Inc. (TER) is set to report the third-quarter 2014 results on Oct 22. Last quarter, it posted a 31.7% positive surprise. Let’s see how things are shaping up for this announcement.

Factors this Past Quarter

The company’s second-quarter earnings of 54 cents per share were above the Zacks Consensus Estimate on the back of higher gross margins and solid expense control. Also, revenues of $525.6 million were up 63.7% sequentially and 22.5% year over year. Orders also improved sequentially driven by capacity expansion and design wins in application processors, power management, microcontroller and memory test.

Gross margins were up 330 basis points (bps) sequentially due to higher revenues and a favorable mix.

For the third quarter, Teradyneexpects revenues in the range of $440–$480 million, down 12.5% sequentially at the mid-point. Non-GAAP earnings per share from continuing operations are expected in the range of 34 to 43 cents and GAAP earnings are expected within 27 to 36 cents.

Earnings Whispers?

Our proven model does not conclusively show that Teradyneis likely to 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 40 cents. Hence, the difference is 0.00%.

Zacks Rank: Teradyne has 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.

Other Stocks to Consider

You could consider other stocks with a positive Earnings ESP and a favorable Zacks Rank such as:

Allied World Assurance Company Holdings, AG (AWH), with an Earnings ESP of +48.08% and a Zacks Rank #1 (Strong Buy).

Century Aluminum Co. (CENX), with an Earnings ESP of +21.57% and a Zacks Rank #1.

Endurance Specialty Holdings Ltd. (ENH), with an Earnings ESP of +3.95% and a Zacks Rank #1.

Read the Full Research Report on TER
Read the Full Research Report on ENH
Read the Full Research Report on CENX
Read the Full Research Report on AWH


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