Nyse Order Imbalance 80433.0 Shares On Sell Side

Quarterly financial reports play a vital role on Wall Street, as they help investors see how a company has performed and what might be coming down the road in the near-term. And out of all of the metrics and results to consider, earnings is one of the most important.

We know earnings results are vital, but how a company performs compared to bottom line expectations can be even more important when it comes to stock prices, especially in the near-term. This means that investors might want to take advantage of these earnings surprises.

The ability to identify stocks that are likely to top quarterly earnings expectations can be profitable, but it's no simple task. Here at Zacks, our Earnings ESP filter helps make things easier.

The Zacks Earnings ESP, Explained

The Zacks Earnings ESP, or Expected Surprise Prediction, aims to find earnings surprises by focusing on the most recent analyst revisions. The basic premise is that if an analyst reevaluates their earnings estimate ahead of an earnings release, it means they likely have new information that could possibly be more accurate.

The core of the ESP model is comparing the Most Accurate Estimate to the Zacks Consensus Estimate, where the resulting percentage difference between the two equals the Expected Surprise Prediction. The Zacks Rank is also factored into the ESP metric to better help find companies that appear poised to top their next bottom-line consensus estimate, which will hopefully help lift the stock price.

When we join a positive earnings ESP with a Zacks Rank #3 (Hold) or stronger, stocks posted a positive bottom-line surprise 70% of the time. Plus, this system saw investors produce roughly 28% annual returns on average, according to our 10 year backtest.

Most stocks, about 60%, fall into the #3 (Hold) category, and they are expected to perform in-line with the broader market. Stocks with a #2 (Buy) and #1 (Strong Buy) rating, or the top 15% and top 5% of stocks, respectively, should outperform the market, with Strong Buy stocks outperforming more than any other rank.

Should You Consider Nvidia?

The last thing we will do today, now that we have a grasp on the ESP and how powerful of a tool it can be, is to quickly look at a qualifying stock. Nvidia (NVDA) holds a #2 (Buy) at the moment and its Most Accurate Estimate comes in at $0.76 a share 15 days away from its upcoming earnings release on November 20, 2024.

Nvidia's Earnings ESP sits at +2.3%, which, as explained above, is calculated by taking the percentage difference between the $0.76 Most Accurate Estimate and the Zacks Consensus Estimate of $0.74. NVDA is also part of a large group of stocks that boast a positive ESP. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they've reported.

NVDA is part of a big group of Computer and Technology stocks that boast a positive ESP, and investors may want to take a look at Onto Innovation (ONTO) as well.

Onto Innovation is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on February 13, 2025. ONTO's Most Accurate Estimate sits at $1.40 a share 100 days from its next earnings release.

The Zacks Consensus Estimate for Onto Innovation is $1.37, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +2.07%.

NVDA and ONTO's positive ESP metrics may signal that a positive earnings surprise for both stocks is on the horizon.

Find Stocks to Buy or Sell Before They're Reported

Use the Zacks Earnings ESP Filter to turn up stocks with the highest probability of positively, or negatively, surprising to buy or sell before they're reported for profitable earnings season trading. Check it out here >>

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Nova Ltd. NVMI is set to report third-quarter 2024 results on Nov. 7.

For the third quarter, Nova projects revenues between $168 million and $176 million. The Zacks Consensus Estimate for the top line is pegged at $172.2 million, indicating an increase of 33.7% from the year-ago quarter’s levels.

Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.

For the quarter, Nova expects non-GAAP earnings to be in the range of $1.60-$1.73 per share. The consensus mark for the bottom line has been steady at $1.68 per share in the past 60 days. The figure indicates a 36.6% increase from the year-ago quarter’s reported figure.

NVMI’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 12.4%.

Nova Ltd. Price and EPS Surprise

Nova Ltd. price-eps-surprise | Nova Ltd. Quote

Earnings Whispers for Nova

Our proven model does not conclusively predict an earnings beat for Nova this time. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is not the case here. You can see the complete list of today’s Zacks #1 Rank stocks here.

NVMI has an Earnings ESP of 0.00% and carries a Zacks Rank #4 (Sell) at present. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Factors to Influence Nova’s Q3 Results

Nova’s continued product expansion and steady demand across all its technologies and markets are likely to have aided third-quarter 2024 performance. In the second quarter, NVMI delivered an impressive top-line performance, with revenues increasing 27.8% year over year to $156.86 million. The results underscore Nova’s effective execution in leveraging its metrology solutions across varied semiconductor applications and processes. The trend is likely to have continued in the to-be-reported quarter.

The rapid adoption of Nova’s PRISM 2 and VeraFlex XPS platforms is anticipated to have boosted third-quarter revenues. PRISM 2 has been particularly effective in advanced packaging and high-bandwidth memory applications, which saw a record booking in the previously reported quarter.

Meanwhile, VeraFlex XPS gained traction in high-demand FinFET and advanced packaging nodes, with over 40% of orders in the second quarter from capacity expansions in these technologies. The trend is likely to have continued in the to-be-reported quarter, thereby boosting its revenues.

However, a slower recovery in some of the key end markets, such as memory and advanced packaging, is likely to have negatively impacted Nova’s sales growth in the third quarter. The anticipated recovery in memory spending is now delayed, with growth in this segment likely to pick up only by the latter half of 2025. This sluggish rebound may affect Nova’s top-line growth in the near term, particularly if the broader memory and storage markets do not accelerate as projected.

Nova’s Price Performance & Valuation

Nova stock has surged 34.7% on a year-to-date (YTD) basis, outperforming the Zacks Electronics - Semiconductors industry, the Zacks Computer and Technology sector and the S&P 500 index’s rise of 34.4%, 24% and 20.6%, respectively.

Compared with its peers, Nova stock has outperformed ASML Holding ASML, Applied Materials AMAT and Onto Innovation ONTO. Shares of ASML Holding have declined 10.8% YTD, while Applied Materials and Onto Innovation have gained 13.2% and 15.2%, respectively.

YTD Price Return Performance

Now, let us look at the value Nova offers to its investors at current levels. Currently, NVMI is trading at a discount with a forward 12-month price-to-earnings (P/E) of 26.11X compared with the industry’s 30.29X. Its competitors, ASML Holding, Applied Materials and Onto Innovation have a forward 12-month P/E of 27.05X, 19.20X and 28.37X, respectively.

Onto Innovation Inc. ONTO reported third-quarter 2024 earnings of $1.34 per share, which beat the Zacks Consensus Estimate by 2.3%. The bottom line compared favorably with the prior-year quarter's 96 cents.

Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.

Revenues of $252 million beat the Zacks Consensus Estimate by 0.7%. The top line expanded 21.7% year over year, driven by advanced nodes recovery and steady growth in advanced packaging technologies, which are critical in supporting artificial intelligence (AI) and power semiconductor demands.

Specialty devices and advanced packaging revenues (64% of total revenues) of $161 million dipped 1.8% sequentially. Revenues from Software and services (19%) grew 5% sequentially to $49 million. Revenues from the Advanced nodes (17%) market jumped 32% quarter over quarter to $42 million.

Onto Innovation Inc. Price, Consensus and EPS Surprise

Onto Innovation Inc. price-consensus-eps-surprise-chart | Onto Innovation Inc. Quote

The Dragonfly platform remains a key growth driver for ONTO, setting a record for inspection revenues this quarter. Also, demand from power semiconductor customers reached an all-time high. It emphasized the significance of the newly launched PACE lab as a model for fostering innovation through collaboration with customers and partners to pioneer 2.5D and 3D packaging technologies.

Apart from these, management highlighted two major acquisitions anticipated to generate up to $100 million in additional annual revenues over the next three years and be accretive to earnings within a year. The acquisition of California-based Lumina Instruments brings ONTO a $250 million market expansion opportunity in wafer and panel manufacturing, as well as in power semiconductors. It also supports ONTO’s Firefly inspection systems for advanced panel packaging.

Furthermore, the company has acquired the lithography business from Kulicke and Soffa Industries, Inc., gaining valuable intellectual property, including 24 issued and eight pending patents, along with a skilled team holding more than 200 man-years of experience in lithography and wafer applications. This acquisition strengthens Onto’s JetStep panel lithography roadmap and enhances its metrology and lithography capabilities.

Margin Details

Non-GAAP operating expenses were $67.5 million, up 17.8% from $57.3 million in the prior-year quarter, owing to higher R&D spending to augment its 3D metrology capabilities for advanced packaging applications.

Non-GAAP gross profit increased to $137.5 million from $106.9 million in the year-earlier quarter. Non-GAAP gross profit margin expanded to 55% from 52% in the prior year quarter.

Non-GAAP operating income was $70 million compared with $49.6 million in the year-ago quarter. Non-GAAP operating margin was 28%, up from 24% in the previous year quarter.

Balance Sheet

As of Sept. 28, the company had $855.4 million in cash, cash equivalents and marketable securities with $144.7 million of total current liabilities compared with $786 million and $148.4 million, respectively, as of June 29, 2024. Accounts receivable were $253.7 million.

In addition, ONTO set a record for cash from operations, which totaled $67 million, equating to 27% of revenues.

Q4 Outlook

Management expects revenues in the range of $253-$267 million. The Zacks Consensus Estimate is pegged at $245.8 million.

Non-GAAP earnings per share are projected to be between $1.33 and $1.48. We project the metric to be $1.26.

GAAP earnings per share are expected to range from $1.04 to $1.19.

ONTO’s Zacks Rank

Onto Innovation currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Companies

Iridium Communications IRDM reported EPS of 21 cents for the third quarter of 2024, beating the Zacks Consensus Estimate by 5%. The company incurred a loss of 1 cent per share in the prior-year quarter.

Shares of IRDM have lost 20.4% in the past year.

Seagate Technology Holdings STX reported first-quarter fiscal 2025 non-GAAP earnings of $1.58 per share, beating the Zacks Consensus Estimate by 6.8% and coming toward the high end of management’s guidance of $1.40 per share (+/- 20 cents). The company reported a non-GAAP loss of 22 cents per share in the year-ago quarter.

Shares of STX have gained 46.1% in the past year.

Western Digital Corporation WDC reported first-quarter fiscal 2025 non-GAAP earnings of $1.78 per share, surpassing the Zacks Consensus Estimate by 2.3%. The company incurred a loss of $1.76 per share in the prior-year quarter.

Shares of WDC have gained 66.9% in the past year.

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