Maxim Integrated Products, Inc. reported first-quarter fiscal 2017 adjusted earnings of 48 cents per share, a penny above the Zacks Consensus Estimate. Also, earnings were up 11.6% from the year-ago quarter.
 

Revenue

Revenues of $561.4 million were down 0.8% sequentially and 0.2% year over year. The decrease was due to weakness in the majority of end markets.

The top line came in line with the company’s guidance of $540 million to $580 million and slightly above the Zacks Consensus Estimate of $560.0 million.

Revenues by End Market

The revenue mix in terms of major markets is discussed below.

The Consumer end market remained the largest revenue contributor, accounting for approximately 31% of revenues. This segment was up sequentially driven by diversification across a variety of tablets, wearables, peripherals, smartphones and gaming systems. The diversification helped the company to offset the revenue impact of a product cancellation by a leading mobility customer.

Industrial, Maxim’s second-largest segment, generated 26% of revenues, down sequentially and in line with seasonality. The segment revenue was up year over year, driven primarily by factory automation products in the areas of interface, signal chain and power management.

The Communications and Data Centerend market accounted for 21% of revenues, down sequentially. The decline was due to soft communications’ infrastructure spending.

The Automotive end market generated 18% of revenues, slight down sequentially but up from the year-ago quarter. The increase was driven by content growth and continued strong adoption of new products.

The Computing business contributed the remaining 4%.

Margins

The non-GAAP gross margin was 64.0%, down 7 basis points (bps) sequentially but up 242 bps year over year. The sequential decline was due to lower revenues.

Non-GAAP operating expenses of $183.6 million decreased 0.7% sequentially and 5.1% year over year. The decline resulted from overall cost control, including initial savings from the company’s restructuring activities.

Pro-forma operating margin was 31.3%, down 10 bps sequentially but up 409 bps year over year.

Net Income

GAAP net income was $137.6 million compared with $92.3 million in the last quarter and ($72.1) million a year ago.

Pro-forma net income was $138.2 million compared with $140.5 million last quarter and $120.3 million a year ago. Our pro-forma calculation excludes restructuring, intangibles amortization, asset impairments and other one-time charges on a tax-adjusted basis.

Balance Sheet & Cash Flow

During the reported quarter, cash flow from operations was $123.4 million compared with $254.0 million in the prior quarter. Important usages of cash during the quarter included $14.3 million on capex, $57.7 million for share repurchases and $93.6 million paid as dividends.

Total cash, cash equivalents and short-term investments were $2.27 billion in the fiscal first quarter, up from $2.23 billion in the prior quarter.

2Q Guidance

For the fiscal second quarter, Maxim expects revenues in the range of $520 million to $560 million based on a quarter-end backlog of $371.0 million. The Zacks Consensus Estimate is pegged at $544.1 million.

Gross margin is expected within 63–65% on an adjusted basis (excluding special items), flat sequentially.

Earnings per share are expected within 40–46 cents on an adjusted basis. The Zacks Consensus Estimate stands at 43 cents.

MAXIM INTG PDTS Price, Consensus and EPS Surprise

 

MAXIM INTG PDTS Price, Consensus and EPS Surprise | MAXIM INTG PDTS Quote

Going Forward

Maxim delivered strong fiscal first-quarter 2017 results with both earnings and revenues exceeding the Zacks Consensus Estimate.

The company expects the automotive market to be up sequentially with increases in battery management systems for electric vehicles and continued growth in infotainment content. However, the Communications and Data Center market is likely to be down in the upcoming quarter. Also, consumer revenue is expected to be down in the December quarter due to lower revenue at a leading customer partially offset by ramp up in a variety of other platforms and customers.

Maxim remains financially strong with convincing margin expansion opportunities through its cost-saving initiatives and R&D focus on high-return investments.

The company is expanding its manufacturing footprint to enhance flexibility and profitability, while lowering capital expenditure. Management also plans to optimize product lines and organization for better returns on R&D investments. These efforts will likely enable Maxim to improve future utilization rates, reduce costs and improve gross margin performance to the mid 60% range.

Maxim is shifting to advanced node process technology development through a recent collaboration with its foundry partners. Products launched under this initiative should expand margins.

Currently, Maxim carries a Zacks Rank #3 (Hold). Better-ranked stocks in the industry include Intel Corp. (INTC Quick QuoteINTC - Free Report) , Applied Materials, Inc. (AMAT Quick QuoteAMAT - Free Report) and ON Semiconductor Corp. (ON Quick QuoteON - Free Report) , each carrying a Zacks Rank #2 (Buy).

Intel delivered a positive earnings surprise of 11.86%, on average, in the trailing four quarters. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Applied Materials witnessed a 0.18% gain in its last day’s stock price. On average, the company delivered a positive earnings surprise 5.05% in the trailing four quarters.

ON Semiconductor witnessed a 0.08% gain in its last day’s stock price. On average, the company delivered a positive earnings surprise 4.58% in the trailing four quarters.

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