It has been about a month since the last earnings report for Integrated Device Technology (IDTI - Free Report) . Shares have added about 9.6% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Integrated Device Tech due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Integrated Device Technology delivered fiscal first-quarter 2019 non-GAAP earnings of 44 cents per share, which surpassed the Zacks Consensus Estimate by a cent. The figure also surged 33.4% on a year-over-year basis but declined 4.3% sequentially.
Revenues increased 16.2% year over year and 1.7% on a sequential basis to $228.5 million. The figure also came ahead of the Zacks Consensus Estimate of $227 million.
Top-line growth was driven by strong performance of the company in data center, consumer and communications end markets with the support of its expanding product portfolio. Moreover, robust new products in the areas of advanced timing memory interface, sensors, RF and wireless power drove the results.
Additionally, the company continued to benefit from increasing use of memory intensive applications in cloud infrastructure, artificial intelligence, big data and machine learning technologies.
End-Market in Details
Data Center Market: The company generated 40% of its revenues from this market which improved 22% from the year-ago quarter. This came on the back of increasing adoption of Integrated Device’s saleable product in the cloud data centers and robust complete system level platform. Further, solid performance of flagship memory interface business drove the results within this market.
Communications Infrastructure Market: This market yielded 29% of the company’s total revenues, which grew 19% year over year. Top-line growth in this market was primarily driven by robust performance of Integrated Device’s RF product lines. This can primarily be attributed to growing adoption of millimeter wave solutions by OEMs across 5G, fixed wireless and satellite communications areas. Moreover, the company’s cellular band gained momentum during the reported quarter aiding the performance of RF product lines. Further, the company witnessed increased adoption of its advanced timing products which remained positive throughout the quarter.
Consumer Market: Integrated Device generated 20% of its revenues from this market, which increased 13% year over year. This was fueled by the emerging wireless power technology which is leading to growing adoption of wireless power products by the consumers worldwide. The company’s wireless power platform continues to benefit from this trend.
Automotive & Industrial Market: This market yielded 11% of total revenues of the company, declining 2% from the year-ago quarter. The decline was owing to transition effect of automotive customer products.
In the fiscal first-quarter 2019, non-GAAP gross margin came in at 63.4%, which massively expanded 200 basis points (bps) on a year-over-year basis and 80 bps sequentially. This can be attributable to favorable product mix.
Additionally, improvement in top-line growth in the communications infrastructure market which was anticipated exhibit some sluggishness in the reported quarter, also contributed well.
Non-GAAP operating expenses were $77.2 million, increasing 8.6% from the prior-year quarter and 5.5% from the previous quarter.
Adjusted operating margin came to 29.6%, expanding 430 bps from the year-ago quarter but contracted 40 bps from the previous quarter.
Balance Sheet & Cash Flows
As of Jul 1, 2018, cash and cash equivalents were $148.1 million, compared with $136.9 million as of Apr 1, 2018. Short-term investments were $198.2 million, down from $222 million in the previous quarter. Inventories were $66.2 million, up 7.5% sequentially.
Cash flow from operations was $44 million, down from $69 million in the last quarter. Further, CapEx spending was around $8 million, declining $9 million sequentially.
The company also generated $36 million of free cash flow in the quarter.
In the reported quarter, Integrated Device repurchased 1.56 million shares worth $49.3 million.
For fiscal second-quarter 2019, Integrated Device expects total revenues to be in the range of $228 million and $238 million.
Both communications and data center markets are anticipated to perform well. Further, industrial & automotive market is expected to exhibit double-digit growth due to the expanding test capacity and increasing customer design wins.
However, consumer market might show some sluggishness on a sequential basis.
Further, the company’s earnings are anticipated to lie in a range of 42-48 cents per share.
Moreover, non-GAAP gross margin and operating margin are projected at 63.8% and 29.7%, respectively.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
At this time, Integrated Device Tech has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. 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 aggregate 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.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Integrated Device Tech has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.