Saturday, April 26, 2014

Rambus Inc. (RMBS) Q1 Earnings Preview: Strong, But Will It Be Strong Enough?

Rambus Inc. (NASDAQ:RMBS) will hold a conference call on April 21, 2014 at 2:00 p.m. Pacific Time to discuss its first quarter 2014 results. This call will be webcast and can be accessed via Rambus' web site at investor.rambus.com.

Wall Street anticipates that the memory chip maker will earn $0.03 per share for the quarter, which is $0.12 more than last year's loss of $0.09 per share. iStock expects RMBS  to miss Wall Street's consensus number. The iEstimate is $0.02, a penny less than expected.

Sales, like earnings, are expected to grow, rising 8.4% year-over-year (YoY). Rambus' consensus revenue estimate for Q1 is $72.45 million, more than last year's $66.87 million.

[Related -Rambus Inc. (RMBS): Worth The Risk?]

The company's technology solutions include memory, chip interfaces and architectures, end-to-end security, and advanced LED lighting. It focuses on designing, developing, and licensing technology related to memory and interfaces; and providing various services, including know-how and technology transfer, product design and development, system integration, and other services.

The semiconductor has bypassed Wall Street's consensus estimate 11 of the last 16 quarterly checkups. The average bullish surprise is pretty big at 745% more than expected, which works out to an average of $0.17 more than the street's outlook.

Meanwhile, the five misses have been more dramatic, falling short of the mark by as much as -700%, as little as -3.33% while averaging 204% less than forecasted, which works out to -$0.06 less than anticipated.

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Investors spilt their reaction to Rambus' last 16 quarterly announcements. Eight of the responses were green and red. Typically, the stock fell by -10.25% in the tree days surrounding eight of the last 16 while increasing by an average of 4.41% for the other eight announcements.

Rambus relies heavily on a handful of companies. Names like Samsung, SK hynix and Micron accounted for 62% of RMBS' revenue in 2013. So far, Micron had a strong quarter and Samsung guided in the middle of their previous guidance, but still strong YoY. That's probably why Wall Street believes Rambus's top and bottom lines are on the rise.

Rambus's financial health appears to be fit heading into Monday afternoon's announcement. Sales increased by 16% in 2013 while the cost of goods sold were up 17%. Of course, we'd prefer for the numbers to be flipped, but they are generally in-line. However, marketing, general and administrative costs falling 32% YoY more than made up the difference.

That being said, management also cut back on research and development. iStock would much rather see the line-item keep pace with revenue growth. Tomorrow could become an issue if you aren't investing in it.

Overall: Rambus Inc. (NASDAQ:RMBS) is positioned to have a strong quarter YoY; however, the iEstimates suggests it might not be as strong as expected. 

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