It has been about a month since the last earnings report for Microsemi Corporation . Shares have lost about 6.1% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to their next earnings release, or is the stock due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Microsemi Misses on Earnings in Q1, Tops Revenues
Microsemi Corporation’s first-quarter fiscal 2017 adjusted earnings of 62 cents per share missed the Zacks Consensus Estimate by 8 cents.
The company’s focus on improving product mix, operational efficiency, and consolidation will continue to drive revenues and margins in calendar 2017.
The integration of PMC-Sierra acquired in Dec 2015 remains well on track and has started contributing to revenues.
Management sounded upbeat on the company’s strategic positioning, strong fundamentals and efficient execution. It expects Data Center revenues and market share to continue growing in the near future.
Let’s have a look at the numbers:
Revenues
Microsemi reported revenues of $435.5 million for the quarter, down 3.2% sequentially but up 32.3% year over year.
Quarterly revenues were slightly above the Zacks Consensus Estimate of $435 million and within management’s guidance of $428–$442 million.
Revenues by End Market
Microsemi generates revenues from the Communications, Defense & Aerospace, Data Center and Industrial markets.
Around 36% ($158 million) of Microsemi’s quarterly revenues came from its largest end market, Communications, which decreased 7% sequentially but increased 25% year over year.
In the quarter, the company saw strong growth across Optical Transport Network (OTN) and timing offerings.
The Defense & Aerospace market generated 26% of sales, down 4% sequentially and 17% year over year. The decrease was due to normal expected seasonality. However, bookings were strong across field-programmable gate array (FPGA) and power management products.
Management expects this end market to continue witnessing growth backed by an improving defense budget and increasing electronic content.
The Data Center segment ($101 million) generated 23% of fiscal first-quarter revenues. The segment increased 7% sequentially driven by continued momentum in Flash controllers. This end market primarily comprises storage controllers, interconnect devices and board level products along with various power management and Ethernet switching products.
For this segment, management expects to see growth from market share gains driven by growth in flash business and NVMe transition.
The Industrial market generated 15% of sales, down 7% sequentially but up 1% year over year. The sequential decline was due to seasonal weakness in power devices for some industrial capital equipment applications.
Margins
Pro-forma gross margin was 63.5%, up 88 basis points (bps) sequentially and 641 bps year over year. The increase was driven by higher revenues, a favorable product mix, operational efficiency and consolidation.
Adjusted operating expenses of $172.1 million increased 1.4% sequentially and 45.7% year over year. Operating margin of 24.0% was down 91 bps sequentially but up 277 bps year over year.
Net Income
Microsemi generated GAAP net income of $19.5 million or earnings of 17 cents per share compared with $23.7 million or earnings of 25 cents per share a year ago.
Excluding special items but including stock-based compensation expense, non-GAAP earnings per share were 70 cents compared with 58 cents in first-quarter fiscal 2016.
Balance Sheet
Cash and cash equivalents balance at the end of the fiscal first quarter was $173.9 million, down from $189.5 million in the last quarter. Operating cash flow was $77.6 million compared with $129.8 million in the previous quarter. Capex was $10.5 million compared with $14.6 million in the previous quarter.
Inventories were $210.4 million compared with $213.1 million in the previous quarter. Accounts receivable was $223.6 million compared with $245.2 million at the end of the prior quarter.
Guidance
Microsemi expects second-quarter fiscal 2017 revenues in a range of $430–$450 million. The Zacks Consensus Estimate of $440.60 million is within the guided range. Non-GAAP earnings per share are likely to be within 86–96 cents, above our estimated 74 cents.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There has been one revision higher for the current quarter compared to two lower.
Microsemi Corporation Price and Consensus
VGM Scores
At this time, Microsemi's stock has a great Growth Score of 'A', though it is lagging a lot on the momentum front with a 'D'. Charting a somewhat similar path, the stock was allocated a grade of 'C' on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregte VGM Score of 'B'. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for growth investors than value investors.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Interestingly the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.
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Microsemi (MSCC) Down 6.1% Since Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for Microsemi Corporation . Shares have lost about 6.1% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to their next earnings release, or is the stock due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Microsemi Misses on Earnings in Q1, Tops Revenues
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There has been one revision higher for the current quarter compared to two lower.
Microsemi Corporation Price and Consensus
Microsemi Corporation Price and Consensus | Microsemi Corporation Quote
VGM Scores
At this time, Microsemi's stock has a great Growth Score of 'A', though it is lagging a lot on the momentum front with a 'D'. Charting a somewhat similar path, the stock was allocated a grade of 'C' on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregte VGM Score of 'B'. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for growth investors than value investors.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Interestingly the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.