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Why Is Marvell Technology (MRVL) Down 6% Since the Last Earnings Report?
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A month has gone by since the last earnings report for Marvell Technology Group Ltd. (MRVL - Free Report) . Shares have lost about 6% in that time frame.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it 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 catalysts.
Marvell Technology Beats on Q3 Earnings and Revenues
Marvell Technology Group Ltd. reported better-than-expected third-quarter fiscal 2018 (ended Oct 28, 2017) results.
The company reported non-GAAP earnings (excluding stock-based compensation and all one-time items) of 34 cents per share, outpacing the Zacks Consensus Estimate by a penny. Reported earnings were far better than the year-ago figure of 21 cents.
Quarter Details
Although Marvell’s revenues declined 1.2% year over year to $616.3 million, it surpassed the Zacks Consensus Estimate of $613 million. Moreover, reported revenues came ahead of the mid-point of management guided range of $595-$625 million (mid-point $610 million).
At the end markets, storage revenues (51% of total revenues) decreased 4% year over year. However, the same increased 1% sequentially on better-than-expected demand at the SSD (Solid-State Drive) segments along with increased demand from enterprise.
The networking business (24%) increased 3% year over year and 2% sequentially mainly due to increase in the network of processor product line.
Revenues from connectivity (17%) increased 19% year over year and 4% sequentially, primarily driven by wins in gaming and home media streaming applications. Other product (8%) revenues during the quarter declined 22% year over year.
Marvell’s non-GAAP gross profit came in at $379.5 million, up 5.7% on a year-over-year basis. Gross margin also increased from 57.2% to 61.3% on a year-over-year basis, primarily buoyed by a favorable product mix and higher revenue base.
Non-GAAP operating expenses decreased 13.8% year over year to $204.5 million. As a percentage of revenues operating expenses contracted 480 basis points to 33.2%. Marvell’s non-GAAP operating margins came in at 28.4% compared with 19.5% reported in the year-ago quarter. The results were positively impacted by lower operating expenses as a percentage of revenues.
The company reported non-GAAP net income (excluding stock-based compensation and all one-time items) of approximately $171.8 million during the quarter as compared with $111.9 million reported in the year-ago quarter.
Marvell exited the quarter with cash, cash equivalents and short-term investments of $1.732 billion as compared with $1.574 billion in the previous quarter. The company carries no long-term debt. Cash from operating activities during the quarter amounted to $216.2 million.
During the quarter, Marvell paid $30 million as dividend to its shareholders and repurchased $140 million worth of shares.
Outlook
Marvell anticipates fourth-quarter 2018 revenues in the range of $595-$625 million (mid-point $610 million).
Management expects non-GAAP gross margin to be approximately 62%, while non-GAAP operating expenses are expected to be roughly between $215 million and $220 million. The company anticipates non-GAAP earnings per share in the band of 29-33 cents (mid-point 31 cents).
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed an upward trend in fresh estimates. There have been six revisions higher for the current quarter. While looking back an additional 30 days, we can see even more upward momentum. There have been nine moves up in the last two months. In the past month, the consensus estimate has shifted by 12.8% due to these changes.
At this time, Marvell Technology's stock has a nice Growth Score of B, though it is lagging a bit on the momentum front with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stocks 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 momentum investors.
Outlook
Estimates have been trending upward for the stock. The magnitude of these revisions also looks promising. It comes with little surprise that the stock has a Zacks Rank #1 (Strong Buy). We are expecting an above average return from the stock in the next few months.
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Why Is Marvell Technology (MRVL) Down 6% Since the Last Earnings Report?
A month has gone by since the last earnings report for Marvell Technology Group Ltd. (MRVL - Free Report) . Shares have lost about 6% in that time frame.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it 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 catalysts.
Marvell Technology Beats on Q3 Earnings and Revenues
Marvell Technology Group Ltd. reported better-than-expected third-quarter fiscal 2018 (ended Oct 28, 2017) results.
The company reported non-GAAP earnings (excluding stock-based compensation and all one-time items) of 34 cents per share, outpacing the Zacks Consensus Estimate by a penny. Reported earnings were far better than the year-ago figure of 21 cents.
Quarter Details
Although Marvell’s revenues declined 1.2% year over year to $616.3 million, it surpassed the Zacks Consensus Estimate of $613 million. Moreover, reported revenues came ahead of the mid-point of management guided range of $595-$625 million (mid-point $610 million).
At the end markets, storage revenues (51% of total revenues) decreased 4% year over year. However, the same increased 1% sequentially on better-than-expected demand at the SSD (Solid-State Drive) segments along with increased demand from enterprise.
The networking business (24%) increased 3% year over year and 2% sequentially mainly due to increase in the network of processor product line.
Revenues from connectivity (17%) increased 19% year over year and 4% sequentially, primarily driven by wins in gaming and home media streaming applications. Other product (8%) revenues during the quarter declined 22% year over year.
Marvell’s non-GAAP gross profit came in at $379.5 million, up 5.7% on a year-over-year basis. Gross margin also increased from 57.2% to 61.3% on a year-over-year basis, primarily buoyed by a favorable product mix and higher revenue base.
Non-GAAP operating expenses decreased 13.8% year over year to $204.5 million. As a percentage of revenues operating expenses contracted 480 basis points to 33.2%. Marvell’s non-GAAP operating margins came in at 28.4% compared with 19.5% reported in the year-ago quarter. The results were positively impacted by lower operating expenses as a percentage of revenues.
The company reported non-GAAP net income (excluding stock-based compensation and all one-time items) of approximately $171.8 million during the quarter as compared with $111.9 million reported in the year-ago quarter.
Marvell exited the quarter with cash, cash equivalents and short-term investments of $1.732 billion as compared with $1.574 billion in the previous quarter. The company carries no long-term debt. Cash from operating activities during the quarter amounted to $216.2 million.
During the quarter, Marvell paid $30 million as dividend to its shareholders and repurchased $140 million worth of shares.
Outlook
Marvell anticipates fourth-quarter 2018 revenues in the range of $595-$625 million (mid-point $610 million).
Management expects non-GAAP gross margin to be approximately 62%, while non-GAAP operating expenses are expected to be roughly between $215 million and $220 million. The company anticipates non-GAAP earnings per share in the band of 29-33 cents (mid-point 31 cents).
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed an upward trend in fresh estimates. There have been six revisions higher for the current quarter. While looking back an additional 30 days, we can see even more upward momentum. There have been nine moves up in the last two months. In the past month, the consensus estimate has shifted by 12.8% due to these changes.
Marvell Technology Group Ltd. Price and Consensus
Marvell Technology Group Ltd. Price and Consensus | Marvell Technology Group Ltd. Quote
VGM Scores
At this time, Marvell Technology's stock has a nice Growth Score of B, though it is lagging a bit on the momentum front with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stocks 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 momentum investors.
Outlook
Estimates have been trending upward for the stock. The magnitude of these revisions also looks promising. It comes with little surprise that the stock has a Zacks Rank #1 (Strong Buy). We are expecting an above average return from the stock in the next few months.