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NVIDIA Corp. (NVDA - Analyst Report) reported first-quarter fiscal 2014 adjusted earnings per share of 14 cents, exceeding the Zacks Consensus Estimate of 11 cents. 

Revenues

The company reported total revenue of $954.7 million in the quarter, up 3.2% from $924.9 million in the year-ago quarter. Revenues remained at the higher end of the company’s outlook.

Revenues generated by the company’s gaming GPUs moved up 24.0% year over year. A single GPU product, GTX Titan, launched three months ago and sold at a retail price of $1,000 witnessed a high demand during the reported quarter.

On the other hand, the revenues generated from consumer PC declined roughly 15.0% over the same time period. The company’s investments in new products have paid off well for the company.

Operating Results

Gross margin, on a GAAP basis, was 54.3% versus 50.1% in the year-ago quarter. Efficient cost management, change in sales mix of high-margin products and the higher sales value of the GPUs sold, resulted in a better gross margin.

GAAP operating expenses in the quarter stood at $435.8 million, up 11.6% from $390.5 million in the previous quarter.

The company reported net income of $77.9 million or 13 cents per share on a GAAP basis, compared with $60.4 million or 10 cents a share in the year-ago quarter. Excluding one-time items but including stock-based compensation expenses, adjusted net income was 14 cents per share, compared with 11 cents per share in the year-ago quarter. The company generated $175.6 million cash from operating activities, up from $451.1 million in the previous quarter.

Balance Sheet & Cash Flow

The company exited the quarter with cash, cash equivalents and marketable securities of $3.71 billion, down from $3.73 billion in the previous quarter. Inventories during the quarter were $377.6 million, down from $419.7 million in the previous quarter. Free cash flow for the quarter stood at $109.9 million, down from $403.2 million in the previous quarter.

Dividend

NVIDIA also declared its next quarterly cash dividend of 7 cents per share, which will be paid on Jun 14, 2013.

Guidance

For the second quarter of 2014, the company expects revenues to move up by 2.0% sequentially. Moreover, NVIDIA expects the GPU business to perform better than that of the Tegra processor segment. NVIDIA is expected to generate lower volume for Tegra 4, in the second quarter.

Outlook

NVIDIA delivered decent first-quarter results, with EPS above the Zacks consensus estimate and revenues higher revenues compared to the year-ago quarter. The company witnessed a modest improvement in the GPU business, while the performances of the PC business and the Tegra processor segment were disappointing.

On the other hand, NVIDIA’s performance may be slightly hampered by the economic slowdown in Europe. Moreover, advanced chips developed by Intel Corp. (INTC - Analyst Report) and Advanced Micro Devices Inc. (AMD - Analyst Report) may increase competition for the company.

NVIDIA Corp. carries a Zacks Rank #3 (Hold).

Investors can consider another stock, STMicroelectronics N.V. (STM - Snapshot Report), carrying a Zacks Rank #2 (Buy).

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