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Linear Technology (LLTC) Beats on Q2 Earnings, Revenues
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Linear Technology Corp. reported second-quarter fiscal 2017 earnings of 54 cents, which exceeded the Zacks Consensus Estimate by a penny. Earnings increased 1.60% sequentially and 8.8% year over year.
In Jul 2016, Linear announced that Analog Devices, Inc. (ADI - Free Report) agreed to acquire its business in a cash and stock deal worth $30 billion. Per the agreement, Linear shareholders will receive $46.00 in cash for each share and an additional 0.2321 of Analog Devices’ common stock for each Linear share.
The deal is expected to be completed by the end of the first half of calendar year 2017.
The acquisition is expected to be accretive to non-GAAP earnings and cash flow going forward. Also, Linear expects to realize $150 million in annual cost synergies in the first 18 months following the closure. The merger of these two companies will create an analog industry leader across a huge range of products, customer breadth and scale. The deal will expand Analog Devices’ total addressable market to $14 billion from $8 billion, allowing it to tap the phenomenal demand in some of the most attractive markets, namely industrial, automotive and communications infrastructure markets.
Coming to the price performance, over the last one year, shares of Linear Technology have outperformed the Zacks characterized Semiconductor-General industry. The stock registered a gain of 60.13% against the industry’s gain of 51.49%.
A quick look at the numbers:
Revenues
Linear reported revenues of $375.8 million, up 8.3% year over year and 0.5% sequentially. The figures were slightly above the Zacks Consensus Estimate of $374.0 million. The increase in revenue was driven by strong growth in the company’s Communication and Industrial markets.
Margins
Pro forma gross margin was 76.3%, up 35 basis points (bps) sequentially and 63 bps year over year, driven by a richer product mix.
Operating expenses of $113.8 million increased 0.7% sequentially and 0.4% year over year. As a percentage of sales, research & development remained the same while selling, general & administrative expenses decreased from the year-ago quarter. As a result, operating margin of 45.5% was up 30 bps sequentially and 246 bps year over year.
GAAP net income was $124.0 million or 50 cents per share compared with $115.1 million or 47 cents in the previous quarter and $121.5 million or 50 cents a year ago. Excluding merger- related charges, pro-forma earnings were $132.2 million versus $130.2 million in the previous quarter and $121.5 million in the year-ago quarter.
Balance Sheet
Linear exited the fiscal second quarter with cash, cash equivalents and marketable securities of approximately $1.61 billion compared with $1.52 billion in the prior quarter. Account receivables were $145.1 million, down from $162.4 million in the fiscal first quarter.
Linear generated $179.5 million from cash for operations and spent $12.1 million on capital expenditures. The company paid $78.7 million as dividend but made no share repurchases as it will soon be acquired by Analog Devices.
Conclusion
Linear Technology reported a strong fiscal second quarter with both earnings and revenues exceeding our expectations.
The company’s business is well diversified among core markets, including industrial, automotive and communications infrastructure. It has an impressive record of returning cash to shareholders through dividends and share buybacks, which should increase investors’ confidence, in our view.
Linear Technology Corporation Price, Consensus and EPS Surprise
Intersil Corporation delivered a positive earnings surprise of 20.42%, on average, in the trailing four quarters.
NVIDIA Corporation delivered a positive earnings surprise of 24.93%, on average, in the trailing four quarters.
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Linear Technology (LLTC) Beats on Q2 Earnings, Revenues
Linear Technology Corp. reported second-quarter fiscal 2017 earnings of 54 cents, which exceeded the Zacks Consensus Estimate by a penny. Earnings increased 1.60% sequentially and 8.8% year over year.
In Jul 2016, Linear announced that Analog Devices, Inc. (ADI - Free Report) agreed to acquire its business in a cash and stock deal worth $30 billion. Per the agreement, Linear shareholders will receive $46.00 in cash for each share and an additional 0.2321 of Analog Devices’ common stock for each Linear share.
The deal is expected to be completed by the end of the first half of calendar year 2017.
The acquisition is expected to be accretive to non-GAAP earnings and cash flow going forward. Also, Linear expects to realize $150 million in annual cost synergies in the first 18 months following the closure. The merger of these two companies will create an analog industry leader across a huge range of products, customer breadth and scale. The deal will expand Analog Devices’ total addressable market to $14 billion from $8 billion, allowing it to tap the phenomenal demand in some of the most attractive markets, namely industrial, automotive and communications infrastructure markets.
Coming to the price performance, over the last one year, shares of Linear Technology have outperformed the Zacks characterized Semiconductor-General industry. The stock registered a gain of 60.13% against the industry’s gain of 51.49%.
A quick look at the numbers:
Revenues
Linear reported revenues of $375.8 million, up 8.3% year over year and 0.5% sequentially. The figures were slightly above the Zacks Consensus Estimate of $374.0 million. The increase in revenue was driven by strong growth in the company’s Communication and Industrial markets.
Margins
Pro forma gross margin was 76.3%, up 35 basis points (bps) sequentially and 63 bps year over year, driven by a richer product mix.
Operating expenses of $113.8 million increased 0.7% sequentially and 0.4% year over year. As a percentage of sales, research & development remained the same while selling, general & administrative expenses decreased from the year-ago quarter. As a result, operating margin of 45.5% was up 30 bps sequentially and 246 bps year over year.
GAAP net income was $124.0 million or 50 cents per share compared with $115.1 million or 47 cents in the previous quarter and $121.5 million or 50 cents a year ago. Excluding merger- related charges, pro-forma earnings were $132.2 million versus $130.2 million in the previous quarter and $121.5 million in the year-ago quarter.
Balance Sheet
Linear exited the fiscal second quarter with cash, cash equivalents and marketable securities of approximately $1.61 billion compared with $1.52 billion in the prior quarter. Account receivables were $145.1 million, down from $162.4 million in the fiscal first quarter.
Linear generated $179.5 million from cash for operations and spent $12.1 million on capital expenditures. The company paid $78.7 million as dividend but made no share repurchases as it will soon be acquired by Analog Devices.
Conclusion
Linear Technology reported a strong fiscal second quarter with both earnings and revenues exceeding our expectations.
The company’s business is well diversified among core markets, including industrial, automotive and communications infrastructure. It has an impressive record of returning cash to shareholders through dividends and share buybacks, which should increase investors’ confidence, in our view.
Linear Technology Corporation Price, Consensus and EPS Surprise
Linear Technology Corporation Price, Consensus and EPS Surprise | Linear Technology Corporation Quote
Zacks Rank
Currently, Linear Technology carries a Zacks Rank #3 (Hold). Stocks worth considering in the industry include Intersil Corporation and NVIDIA Corporation (NVDA - Free Report) carrying a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Intersil Corporation delivered a positive earnings surprise of 20.42%, on average, in the trailing four quarters.
NVIDIA Corporation delivered a positive earnings surprise of 24.93%, on average, in the trailing four quarters.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?
Who wouldn't? As of early December, the 2016 Top 10 produced 5 double-digit winners including oil and natural gas giant Pioneer Natural Resources which racked up a stellar +50% gain. The new list is painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. Be among the very first to see it>>