A month has gone by since the last earnings report for Maxim Integrated Products, Inc. . Shares have added about 7.4% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock’s next earnings release, or is it due for a pullback? 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.
Maxim Beats Earnings and Revenue Estimates in Q2
Maxim Integrated Products, Inc. reported second-quarter fiscal 2017 adjusted earnings of 46 cents per share, above the Zacks Consensus Estimate by 3 cents. Also, earnings were up 29.9% from the year-ago quarter.
Over the past one year, shares of Maxim underperformed the Zacks categorized Semi- Analog & Mixed industry. While the industry gained 41.55%, the stock returned only 33.46%.
Revenue
Revenues of $551.0 million were down 1.9% sequentially but up 7.9% year over year. The year-over-year increase was driven by strength in the majority of end markets.
The top line matched the company’s guidance of $520 million to $560 million and came above the Zacks Consensus Estimate of $536.0 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 down sequentially but up from the year-ago quarter. The increase was driven by diversification across a variety of tablets, wearables, peripherals, smartphones and gaming systems.
Industrial, Maxim’s second-largest segment, generated 25% of revenues, down sequentially but up from the year-ago quarter. 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 Center end market accounted for 21% of revenues, down sequentially but up from the year-ago quarter. The increase was driven by growth in data center and cable businesses.
The Automotive end market generated 19% of revenues, up sequentially as well as 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 64.1%, up 5 basis points (bps) sequentially and 361 bps year over year. The increase was due to higher revenues and a favorable mix.
Non-GAAP operating expenses of $185.6 million increased 1.1% sequentially but decreased 0.6% year over year. The year-over-year decline resulted from overall cost control, including initial savings from the company’s restructuring activities.
Proforma operating margin was 30.4%, down 90 bps sequentially but up 648 bps year over year.
Net Income
GAAP net income was $130.5 million compared with $137.6 million in the last quarter and $67.5 million a year ago.
Proforma net income was $132.5 million compared with $138.2 million last quarter and $93.0 million a year ago. Our proforma 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 $193.0 million compared with $123.4 million in the prior quarter. Important usages of cash in the quarter included $16.0 million on capex, $61.0 million for share repurchases and $94.0 million paid as dividends.
Total cash, cash equivalents and short-term investments were $2.09 billion in the fiscal second quarter, down from $2.27 billion in the prior quarter.
3Q Guidance
For the fiscal third quarter, Maxim expects revenues in the range of $555 million to $595 million based on a quarter-end backlog of $388.0 million. The Zacks Consensus Estimate is pegged at $569.9 million.
Gross margin is expected within 61–63% on an adjusted basis (excluding special items).Earnings per share are expected within 49–55 cents on an adjusted basis. The Zacks Consensus Estimate stands at 49 cents.
Going Forward
Maxim delivered strong fiscal second-quarter 2017 results with both earnings and revenues exceeding the Zacks Consensus Estimate.
For the upcoming third quarter, the company expects the automotive market to be up sequentially driven by continued growth in infotainment content and strong momentum in electric vehicle battery management. The industrial market will be up sequentially, driven by strength from factory automation content. Also, the Communications and Data Center market is likely to be up in the upcoming quarter. However, consumer revenue is expected to be down in the March quarter due to lower demand from Samsung and seasonality.
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.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the last one month period as none of them issued any earnings estimate revisions.
VGM Scores
At this time, Maxim Integrated's stock has a nice stock has a nice score of 'B' on both growth and momentum front. However, the stock was allocated a grade of 'D' on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregte VGM Score of 'C'. 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 suitable for momentum and growth investors.
Outlook
The stock has a Zacks Rank #2 (Buy). We are expecting an above average return from the stock in the next few months.
Image: Bigstock
Why Is Maxim Integrated (MXIM) Up 7.4% Since the Last Earnings Report?
A month has gone by since the last earnings report for Maxim Integrated Products, Inc. . Shares have added about 7.4% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock’s next earnings release, or is it due for a pullback? 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.
Maxim Beats Earnings and Revenue Estimates in Q2
How Have Estimates Been Moving Since Then?
Analysts were quiet during the last one month period as none of them issued any earnings estimate revisions.
Maxim Integrated Products, Inc. Price and Consensus
Maxim Integrated Products, Inc. Price and Consensus | Maxim Integrated Products, Inc. Quote
VGM Scores
At this time, Maxim Integrated's stock has a nice stock has a nice score of 'B' on both growth and momentum front. However, the stock was allocated a grade of 'D' on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregte VGM Score of 'C'. 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 suitable for momentum and growth investors.
Outlook
The stock has a Zacks Rank #2 (Buy). We are expecting an above average return from the stock in the next few months.