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Broadcom (AVGO) Beats on Q2 Earnings; Revenues Rise Y/Y
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Leading semiconductor manufacturer Broadcom Limited (AVGO - Free Report) recorded solid second-quarter fiscal 2016 (ended May 1, 2016) results with healthy year-over-year improvements in revenues.
GAAP loss in second-quarter fiscal 2016 was ($1,186) million or ($3.02) per share as against earnings of $344 million or $1.21 per share in the year-earlier quarter. Non-GAAP earnings from continuing operations for the reported quarter were $1,120 million or $2.53 per share, which comfortably exceeded the Zacks Consensus Estimate of $2.28.
Quarter Details
Total quarterly GAAP revenue increased 119% year over year to $3,541 million but missed the Zacks Consensus Estimate of $3,550 million. The year-over-year upsurge in revenues was led by strong product cycles from switching and broadband, slightly offset by fall in demand for hard disk drives and premium smartphones. Non-GAAP revenues from continuing operations for second-quarter fiscal 2016 were $3,562 million, up from $1,645 million in the year-earlier quarter.
GAAP gross margin for the reported quarter declined to 30% from 52% in the year-ago quarter. Operating loss (GAAP) was $1,001 million in second-quarter fiscal 2016, while it was an operating income of $418 million in the same quarter last year.
By segments, GAAP revenue from Wireless Communications accounted for 22% of the total revenue and showed an increase of 38% year over year to $792 million due to increased demand in the semiconductor market. GAAP revenues from Wired Infrastructure represented 58% of the total and improved remarkably year over year to $2,060 million. Revenue growth was primarily due to strong demand from enterprise networking features and service provider routers.
Quarterly GAAP revenues from Enterprise Storage accounted for 15% of the total revenue at $525 million. Revenues from this segment were down 12% year over year due to a decline in shipments of enterprise and datacenter hard disk drives.
Significant Development
During the quarter, in addition to Avago classic RF FBAR (Film Bulk Acoustic Resonator) filters and power amplifiers, the company’s wireless segment also included classic Broadcom's wireless connectivity and custom analog handset solution.
Synergistic benefits from last year’s merger of Avago Technologies with its rival Broadcom Corp. are likely to increase profitability through economies of scale and mutual sharing of manufacturing expertise, research and development costs and adjustment of staffing expenses. The transaction will likely result in $750 million of annual cost synergies within the first 18 months of operation and is expected to be immediately accretive to non-GAAP earnings and free cash flow.
Cash Flow & Balance Sheet
Broadcom generated $622 million in cash from operating activities in the reported quarter compared with $663 million in the prior-year period. Capital expenditures were $158 million, down from $177 million in the year-earlier quarter.
At quarter end, Broadcom had $2,041 million in cash and cash equivalents with long-term debt of $14,664 million. During second-quarter fiscal 2016, the company paid a dividend of 49 cents per share. Broadcom has continuously increased the quarterly dividend since its inception. The company’s board of directors further approved an interim dividend of 50 cents per share for third-quarter fiscal 2016.
Guidance
Along with the quarterly results, Broadcom provided guidance for third-quarter fiscal 2016 based on current market conditions. GAAP revenue is expected to be in the vicinity of $10.75 billion plus or minus $75 million, while gross margin is projected at about 60%. Capital expenditures are expected to be approximately $230 million.
Broadcom carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the industry include Alpha & Omega Semiconductor, Ltd. (AOSL - Free Report) , Exar Corp. and CEVA Inc. (CEVA - Free Report) . All three stocks carry a Zacks Rank #2 (Buy).
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Broadcom (AVGO) Beats on Q2 Earnings; Revenues Rise Y/Y
Leading semiconductor manufacturer Broadcom Limited (AVGO - Free Report) recorded solid second-quarter fiscal 2016 (ended May 1, 2016) results with healthy year-over-year improvements in revenues.
GAAP loss in second-quarter fiscal 2016 was ($1,186) million or ($3.02) per share as against earnings of $344 million or $1.21 per share in the year-earlier quarter. Non-GAAP earnings from continuing operations for the reported quarter were $1,120 million or $2.53 per share, which comfortably exceeded the Zacks Consensus Estimate of $2.28.
Quarter Details
Total quarterly GAAP revenue increased 119% year over year to $3,541 million but missed the Zacks Consensus Estimate of $3,550 million. The year-over-year upsurge in revenues was led by strong product cycles from switching and broadband, slightly offset by fall in demand for hard disk drives and premium smartphones. Non-GAAP revenues from continuing operations for second-quarter fiscal 2016 were $3,562 million, up from $1,645 million in the year-earlier quarter.
GAAP gross margin for the reported quarter declined to 30% from 52% in the year-ago quarter. Operating loss (GAAP) was $1,001 million in second-quarter fiscal 2016, while it was an operating income of $418 million in the same quarter last year.
By segments, GAAP revenue from Wireless Communications accounted for 22% of the total revenue and showed an increase of 38% year over year to $792 million due to increased demand in the semiconductor market. GAAP revenues from Wired Infrastructure represented 58% of the total and improved remarkably year over year to $2,060 million. Revenue growth was primarily due to strong demand from enterprise networking features and service provider routers.
Quarterly GAAP revenues from Enterprise Storage accounted for 15% of the total revenue at $525 million. Revenues from this segment were down 12% year over year due to a decline in shipments of enterprise and datacenter hard disk drives.
Significant Development
During the quarter, in addition to Avago classic RF FBAR (Film Bulk Acoustic Resonator) filters and power amplifiers, the company’s wireless segment also included classic Broadcom's wireless connectivity and custom analog handset solution.
Synergistic benefits from last year’s merger of Avago Technologies with its rival Broadcom Corp. are likely to increase profitability through economies of scale and mutual sharing of manufacturing expertise, research and development costs and adjustment of staffing expenses. The transaction will likely result in $750 million of annual cost synergies within the first 18 months of operation and is expected to be immediately accretive to non-GAAP earnings and free cash flow.
Cash Flow & Balance Sheet
Broadcom generated $622 million in cash from operating activities in the reported quarter compared with $663 million in the prior-year period. Capital expenditures were $158 million, down from $177 million in the year-earlier quarter.
At quarter end, Broadcom had $2,041 million in cash and cash equivalents with long-term debt of $14,664 million. During second-quarter fiscal 2016, the company paid a dividend of 49 cents per share. Broadcom has continuously increased the quarterly dividend since its inception. The company’s board of directors further approved an interim dividend of 50 cents per share for third-quarter fiscal 2016.
Guidance
Along with the quarterly results, Broadcom provided guidance for third-quarter fiscal 2016 based on current market conditions. GAAP revenue is expected to be in the vicinity of $10.75 billion plus or minus $75 million, while gross margin is projected at about 60%. Capital expenditures are expected to be approximately $230 million.
Broadcom carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the industry include Alpha & Omega Semiconductor, Ltd. (AOSL - Free Report) , Exar Corp. and CEVA Inc. (CEVA - Free Report) . All three stocks carry a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>