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Tickers in this Article: SNDK, RMBS, ELNK, SPRD
We expect memory chip maker SanDisk Corp. (SNDK) to beat expectations when it reports second quarter 2013 results on Jul 17.

Why a Likely Positive Surprise?

Our proven model shows that SanDisk 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 +4.55%. 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 SanDisk’s Zacks Rank # 1 (Strong Buy) and +4.55% ESP makes us very confident in looking for a positive earnings beat on Jul 17.

What is Driving the Better Than Expected Earnings?

Improved supply/demand metrics for NAND and solid state drive (SSD), strength across OEM (original equipment manufacturer) and Retail channels and tailwinds from weak yen are expected to lead to a positive earnings surprise in the upcoming quarter.

The positive trend is evident from the trailing four-quarter average surprise of 22.9%. This was possible mainly due to solid recovery in the mobile embedded and retail businesses, strength across geographies and favorable supply/demand metrics.

Other Stocks to Consider

Apart from SanDisk, we also expect earnings beat from the following stocks.

Earthlink Inc. (ELNK), Earnings ESP of +33.33% and Zacks Rank #1 (Strong Buy).

Rambus Inc. (RMBS), Earnings ESP of +9.09% and Zacks Rank #1 (Strong Buy).

Spreadtrum Communications Inc. (SPRD), Earnings ESP of +9.68% and Zacks Rank #1 (Strong Buy).

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