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Integrated Device Tech (IDTI) Up 2% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Integrated Device Technology (IDTI - Free Report) . Shares have added about 2% 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 Q2 Earnings & Revenues Top Estimates

Integrated Device Technology delivered fiscal second-quarter 2019 non-GAAP earnings of 47 cents per share, surpassing the Zacks Consensus Estimate by 2 cents. The figure also surged 34.3% on a year-over-year basis and 6.8% sequentially.

Revenues increased 15.2% year over year and 3.1% on a sequential basis to $235.5 million. The figure also came ahead of the Zacks Consensus Estimate of $234.1 million.

The top line was driven by the company’s strong performance across all the end markets, especially in the communications and data center markets.

Moreover, the company’s expanding product portfolio and strategic partnerships contributed well to the third-quarter results.

Last month, the company entered into a definitive agreement to be acquired by Renesas Electronics Corporation for around $6.7 billion in an all-cash transaction. The deal is expected to close in the first half of 2019.

End-Market Details
   
The company generated 39% of its total revenues from the Data Center market in the second quarter, expanding 100 basis points (bps) year over year. Integrated Device continued to benefit from growing usage of optical components and modules in the data centers.

Further, increasing cloud data traffic remained positive and will continue to drive the demand for the company’s Electro-absorption modulation laser driver and trans-impedance amplifier which was launched during the reported quarter.

Moreover, Communications Infrastructure market accounted for 31% of the total revenues in the quarter under review, expanding 200 bps from the year-ago quarter. Additionally, Automotive & Industrial market generated 13% of revenues which remained flat year over year.

However, the contribution from Consumer market to the total revenues contracted 300 bps on a year-over-year basis to 17%.

Operating Details

In the fiscal second-quarter 2019, non-GAAP gross margin came in at 64.2%, which significantly expanded 280 basis points (bps) on a year-over-year basis and 80 bps sequentially.

Non-GAAP research and development spending came in $46.4 million, increasing 12.3% from the prior-year quarter and 3.8% from the previous quarter. Further, selling, general and administrative expenses were $32.7 million, up 4.8% from the year-ago quarter and 0.6% sequentially.

Adjusted operating margin came to 30.6%, expanding 470 bps from the year-ago quarter and 100 bps from the previous quarter.

Balance Sheet

As of Sep 30, 2018, cash and cash equivalents were $200.6 million, compared with $148.1 million as of Jul 1, 2018. Short-term investments were $192 million, down from $198.2 million in the previous quarter. Inventories were $61.1 million, declined from $66.2 million in the fiscal first-quarter 2019.

In the fiscal second quarter, Integrated Device repurchased shares worth $38.1 million.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month.

VGM Scores

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.

Outlook

Integrated Device Tech has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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