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Infineon (IFFNY) Q4 Earnings and Revenues Increase Y/Y

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Infineon Technologies AG (IFNNY - Free Report) reported fourth-quarter fiscal 2018 adjusted earnings of €0.28 per share (or approximately 33 cents per share), up 27.3% from the year-ago quarter, primarily due to strong segment result.

Revenues increased 12.5% year over year to €2.047 billion (or almost $2.399 billion) in the reported quarter. Management remains elated on crossing the €2 billion mark in revenues for the first time.

Strength in three of the company’s four business segments, namely, Automotive (“ATV”), Industrial Power Control (“IPC”) and Power Management & Multimarket (“PMM”) drove year-over-year growth. Revenues fared better than management’s guidance.

Share Price Performance

The shares were down 8.7% yesterday. Notably, shares of Infineon have shed 33.2% in the past year, compared with the industry’s decline of 7.5%.




However, robust adoption of advanced driver assistance systems (“ADAS”) and new deal wins hold promise and are anticipated to win back investors confidence, going ahead.

Segmental Highlights

ATV accounted for 42% of total revenues, advancing 17.8% year over year to €867 million. The segment witnessed persistent strong demand for electric drive train devices during the reported quarter.

IPC represented 18% of total revenues, increasing 10.1% year over year to €361 million. The segment is benefiting from strong demand in industrial automation appliances. Products utilized in wind power plants also witnessed traction.

PMM contributed 32% to total revenues, increasing 13.6% on a year-over-year basis to €651 million. Strong demand in AC/DC and DC/DC conversion were noticeable in the quarter. Further, increasing production capacity benefited the segment. Growth was also aided by the favorable seasonal demand for smartphone devices.

Chip Card & Security or CCS has been renamed to Digital Security Solutions or DSS, effective from Oct 1, 2018. DSS segment revenues contributed 8% to total revenues, declining 9.9% from the year-ago quarter to €163 million. While Authentication supported the segment, a lackluster payment and government ID market acted as a headwind.

Revenue Break-up by Geography

Region-wise, Europe, Middle East, Africa revenues grew 5.5% on a year-over-year basis to €611 million (29.8% of total revenues). Specifically, Germany contributed €293 million, up 4.6% from the year-ago quarter.

Revenues from Asia-Pacific (excluding Japan and Greater China) advanced 22.4% on a year-over-year basis to €311 million (15.2%).

Revenues from Greater China improved 11.8% to €729 million, representing 35.6% of total revenues. China, in particular contributed €535 million to Greater China revenues, advancing 11.9% from the year-ago quarter.

Revenues from Japan surged 19.8% from the year-ago quarter to €145 million (7.1% of total revenues).

Revenues from Americas came in at €251 million (12.3% of total revenues), increasing 17.3% from the year-ago quarter. Specifically, the United States contributed €206 million, up 19.1% from the year-ago quarter.

Operating Details

Adjusted gross margin expanded 200 basis points (“bps”) from the year-ago quarter to 40.6%. Segment result surged almost 22% from the year-ago quarter to €400 million. Segment result margin expanded 150 bps on a year-over-year basis to 19.5%.

Segment-wise, IPC and PMM margins expanded 190 bps and 580 bps, to 20.2% and 27.8%, respectively, on a year-over-year basis. ATV and DSS segment margins contracted 20 bps and 350 bps from the year-ago quarter, to 14.6% and 14.7%, respectively.

Research & Development (“R&D”) as a percentage of revenues expanded 50 bps to 10.9%, while Selling, General & Administrative (“SG&A”) expenses contracted 20 bps to 11.1% on a year-over-year basis.

Operating income came in at €370 million, reflecting growth of 36% from the year-ago quarter. Operating margin expanded 315 bps in the same period to 18.1%.

Income from operations during the reported quarter came in at €300 million compared with the year-ago figure of €177 million. Net income declined 19.9% on a year-over-year basis to €141 million, primarily reflecting a loss of €159 million owing to discontinued operations.

Balance Sheet & Cash Flow

Infineon ended the fourth quarter with €732 million in cash & cash equivalents compared with €771 million reported in the previous quarter.

Total debt (including current portion) as on Sep 30, 2018, was €1.53 billion down from €1.83 billion at the end of the previous quarter.

Infineon generated €643 million as cash from operations compared with the previous quarter’s figure of €461 million.

Free cash flow in the quarter came in at €227 million, up from €192 million, recorded at the end of the previous quarter.

The company intends to increase dividend to €0.27 for fiscal 2018, subject to shareholder approval. Notably, the company had paid dividends of €0.25 in fiscal 2017.

Infineon Technologies AG Price, Consensus and EPS Surprise

 

Infineon Technologies AG Price, Consensus and EPS Surprise | Infineon Technologies AG Quote

Fiscal 2018 at a Glance

In fiscal 2018, Infineon reported adjusted earnings of €0.98, up 15.3% from fiscal-2017 level. The upside was primarily driven by growth of 7.6% in revenues, which came in at almost €7.6 billion.

Management had anticipated fiscal 2018 revenues to grow between 6.4% and 7.4% and segment margin to come in at 17.5% of the mid-point of revenue guidance range.

ATV, PMM, IPC and DSS contributed 43.2%, 30.5%, 17.4% and 8.7%, respectively, to total revenues in fiscal 2018. Segment margin in fiscal 2018 came in at 17.8%.

Guidance

For fiscal 2019, revenues are expected to grow almost 11% (+/- 2%). Segment margin is projected to be almost 18% at mid-point of the guidance.

ATV segment revenues are envisioned to grow above the company’s growth average. PMM revenues are expected to remain flat compared with fiscal 2018. IPC revenues are anticipated to grow marginally below the company’s growth average.

However, DSS revenues are anticipated to decline in lieu of difficult market situation.

First-quarter fiscal 2019 revenues are anticipated to decline 4% (+/- 2%) on a sequential basis primarily owing to seasonality. Segment margin is envisioned to be almost 17.5% at mid-point of the guidance.

Zacks Rank & Stocks to Consider

Infineon carries a Zacks Rank #3 (Hold).

SS&C Technologies Holdings, Inc. (SSNC - Free Report) , Cadence Design Systems, Inc. (CDNS - Free Report) and Intel Corporation (INTC - Free Report) are stocks worth considering in the sector. These stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for SS&C, Cadence and Intel are pegged at 13.5%, 12% and 8.4%, respectively.

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