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Semtech (SMTC) Q3 Earnings In Line; Sales Miss Estimates
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Semtech Corporation (SMTC - Free Report) reported third-quarter fiscal 2017 earnings of 28 cents per share, in line with the Zacks Consensus Estimate. Adjusted earnings per share exclude one-time items but include stock-based compensation expense.
Shares of Semtech have been steadily treading higher on a year-to-date basis. The stock has returned 60.15% compared with the Zacks Semi-Analog and Mixed industry’s gain of 21.60%.
Revenues
Semtech’s total revenue was $137.2 million, up 0.9% sequentially and 18.5% year over year. The upside was driven by strong demand for the company’s consumer and communication end-markets, partially offset by weakness in the enterprise market.
Reported revenues came within management’s expected range of $134.0 million to $142.0 million but below the Zacks Consensus Estimate of $139.0 million.
Distribution sales represented approximately 64% of total revenue, while direct sales accounted for the rest.
Bookings
During the quarter, bookings increased 48% year over year. However, the book-to-bill ratio was above 1.
Margins
Reported gross margin was 59.1%, down 110 basis points (bps) sequentially and 100 bps year over year. The decline was due to an unfavorable mix.
Semtech’s operating expenses (selling, general and administrative (SG&A) + product development and engineering) of $60.7 million increased 5.4% from $57.6 million in the year-ago quarter. As a percentage of sales, both SG&A, and product development & engineering expenses decreased. The net result was an operating margin of 28.5% compared with 16.3% in the third-quarter of fiscal 2016.
Net Income
On a GAAP basis, Semtech recorded net income of $30.8 million or 46 cents per share versus $10.7 million or 16 cents per share a year ago.
On a pro forma basis, Semtech generated earnings per share of 28 cents compared with 12 cents a year ago.
Balance Sheet & Cash Flow
Semtech ended the quarter with cash and cash equivalents of $298.0 million compared with $238.9 million in the previous quarter. Accounts receivables were $59.2 million, up from $57.0 million in the prior quarter. Days sales outstanding increased by two to 38.
Total debt (short term plus long term) was $247.9 million compared with $247.7 million in the previous quarter.
During the quarter, cash flow from operations was $39.2 million, capital expenditure was $8.4 million and free cash flow totaled $30.8 million.
Guidance
For the fourth quarter of fiscal 2017, on a non-GAAP basis, management expects revenues in the range of $134.0 million to $142.0 million. Gross profit margin is expected within 60.0–60.5%.
Management projects SG&A expense within $27–$28 million, and research and development expense of $24–$25 million.
GAAP earnings per share are expected in the range of 13–17 cents, while non-GAAP earnings are projected within 33–37 cents. The Zacks Consensus Estimate is pegged at 27 cents.
Semtech Corp. manufactures a wide range of analog and mixed-signal semiconductors, including Standard Semiconductor Products, Rectifier and Assembly Products and Other Products.
We believe that Semtech’s new design wins, product introductions and solid execution will boost revenues and margins in the near term. However, challenges to several key end markets could weigh on the company’s prospects.
Cognex Corporation delivered a positive earnings surprise of 24.92% in the trailing four quarters.
Itron, Inc. delivered a positive earnings surprise of 30.55%, on average, in the trailing four quarters.
Teradyne Inc. delivered a positive earnings surprise of 19.26% in the trailing four quarters.
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Semtech (SMTC) Q3 Earnings In Line; Sales Miss Estimates
Semtech Corporation (SMTC - Free Report) reported third-quarter fiscal 2017 earnings of 28 cents per share, in line with the Zacks Consensus Estimate. Adjusted earnings per share exclude one-time items but include stock-based compensation expense.
Shares of Semtech have been steadily treading higher on a year-to-date basis. The stock has returned 60.15% compared with the Zacks Semi-Analog and Mixed industry’s gain of 21.60%.
Revenues
Semtech’s total revenue was $137.2 million, up 0.9% sequentially and 18.5% year over year. The upside was driven by strong demand for the company’s consumer and communication end-markets, partially offset by weakness in the enterprise market.
Reported revenues came within management’s expected range of $134.0 million to $142.0 million but below the Zacks Consensus Estimate of $139.0 million.
Distribution sales represented approximately 64% of total revenue, while direct sales accounted for the rest.
Bookings
During the quarter, bookings increased 48% year over year. However, the book-to-bill ratio was above 1.
Margins
Reported gross margin was 59.1%, down 110 basis points (bps) sequentially and 100 bps year over year. The decline was due to an unfavorable mix.
Semtech’s operating expenses (selling, general and administrative (SG&A) + product development and engineering) of $60.7 million increased 5.4% from $57.6 million in the year-ago quarter. As a percentage of sales, both SG&A, and product development & engineering expenses decreased. The net result was an operating margin of 28.5% compared with 16.3% in the third-quarter of fiscal 2016.
Net Income
On a GAAP basis, Semtech recorded net income of $30.8 million or 46 cents per share versus $10.7 million or 16 cents per share a year ago.
On a pro forma basis, Semtech generated earnings per share of 28 cents compared with 12 cents a year ago.
Balance Sheet & Cash Flow
Semtech ended the quarter with cash and cash equivalents of $298.0 million compared with $238.9 million in the previous quarter. Accounts receivables were $59.2 million, up from $57.0 million in the prior quarter. Days sales outstanding increased by two to 38.
Total debt (short term plus long term) was $247.9 million compared with $247.7 million in the previous quarter.
During the quarter, cash flow from operations was $39.2 million, capital expenditure was $8.4 million and free cash flow totaled $30.8 million.
Guidance
For the fourth quarter of fiscal 2017, on a non-GAAP basis, management expects revenues in the range of $134.0 million to $142.0 million. Gross profit margin is expected within 60.0–60.5%.
Management projects SG&A expense within $27–$28 million, and research and development expense of $24–$25 million.
GAAP earnings per share are expected in the range of 13–17 cents, while non-GAAP earnings are projected within 33–37 cents. The Zacks Consensus Estimate is pegged at 27 cents.
SEMTECH CORP Price, Consensus and EPS Surprise
SEMTECH CORP Price, Consensus and EPS Surprise | SEMTECH CORP Quote
Our Recommendation
Semtech Corp. manufactures a wide range of analog and mixed-signal semiconductors, including Standard Semiconductor Products, Rectifier and Assembly Products and Other Products.
We believe that Semtech’s new design wins, product introductions and solid execution will boost revenues and margins in the near term. However, challenges to several key end markets could weigh on the company’s prospects.
Currently, Semtech has a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry include Cognex Corporation (CGNX - Free Report) , Itron, Inc. (ITRI - Free Report) and Teradyne Inc. (TER - Free Report) with a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Cognex Corporation delivered a positive earnings surprise of 24.92% in the trailing four quarters.
Itron, Inc. delivered a positive earnings surprise of 30.55%, on average, in the trailing four quarters.
Teradyne Inc. delivered a positive earnings surprise of 19.26% in the trailing four quarters.
The Best Place to Start Your Stock Search
Today, you are invited to download the full list of 220 Zacks Rank #1 ""Strong Buy"" stocks – absolutely free of charge. Since 1988, Zacks Rank #1 stocks have nearly tripled the market, with average gains of +26% per year. Plus, you can access the list of portfolio-killing Zacks Rank #5 ""Strong Sells"" and other private research. See these stocks free >>