A month has gone by since the last earnings report for Maxim Integrated Products (MXIM - Free Report) . Shares have added about 12.4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Maxim 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 catalysts.
Maxim's Q1 Earnings In Line, Revenues Top Estimates
Maxim Integrated Products reported fiscal first-quarter 2019 adjusted earnings of 75 cents per share, increasing 25% from the year-ago quarter and 2.7% sequentially. The figure also came in line with the Zacks Consensus Estimate.
Revenues of $638.5 million increased 10.9% year over year and inched up 1% from the previous quarter. This was driven by strong momentum across automotive, industrial, consumer and data center markets. Further, the company’s distribution channel also contributed well throughout the quarter.
The top line was within the company’s guidance of $615-$655 million and also surpassed the Zacks Consensus Estimate of $634 million.
End-Market in Detail
Industrial: The company generated 28% of its total revenues during the reported quarter. Revenues in this market increased 12% from the prior-year quarter, primarily driven by factory automation products, content growth in medical products and broad market sales growth.
Automotive: This market yielded 21% of revenues during the fiscal first quarter. Further, revenues were up 15% on a year-over-year basis. This can primarily be attributed to strong performance of battery management systems for electric vehicles and driver assistance content, revenues from which surged 60% from the year-ago quarter. Moreover, increasing design wins for battery management systems and expanding customer base due to new product introductions aided Maxim’s performance in this market.
Consumer: Maxim generated 28% of revenues from this market. Revenues in this market went up 13% year over year, driven by the company’s solid momentum across wearables, gaming, tablets, smartphones and peripheral markets.
Communications and Data Center: Revenues in this market went up 9% from the year-ago quarter and accounted for 20% of the total revenues in the reported quarter. This was due to strong performance of 100G optical products which mitigated the sluggishness in communications infrastructure.
Computing: This market accounted for 3% of the total revenues during the quarter under review. The company’s performance in this market was weak and consequently revenues declined 9% year over year.
Non-GAAP gross margin was 68.5%, up 160 basis points (bps) year over year and 50 bps sequentially.
Non-GAAP operating expenses of $194.2 million decreased 0.2% sequentially but increased 6.5% year over year. However, as a percentage of revenues, the figure contracted 30 bps sequentially and 130 bps year over year.
Operating margin was 38%, up 280 bps from the prior-year quarter and 290 bps quarter over quarter.
Balance Sheet & Cash Flow
As of Sep 29, 2018, cash, cash equivalents and short-term investments were $2.56 billion compared with $2.63 billion as of Jun 30, 2018.
During the quarter under review, cash flow from operations was $207.2 million, increasing from $146.7 million in the last reported quarter. The company used $18 million for capital expenditure during the fiscal first quarter.
Further, Maxim spent $112 million in repurchasing shares and made $128 million of dividend payment (46 cents per share).
For fiscal second-quarter 2019, Maxim expects revenues in the range of $570 million to $610 million.
Gross margin is expected within 66-68% on an adjusted basis (excluding special items). Earnings per share are expected in the range of 59-65 cents on an adjusted basis.
Management expects to retain its strong momentum in the automotive market in the fiscal second quarter, backed by the company’s strengthening content in driver assistance applications and well performing battery management systems.
However, management has announced that industrial market will be significantly down due to sluggish bookings and weakening momentum across the company’s customers. Further, slowing shipment of 100G optical module remains a hindrance for the company’s performance in the data center market.
Moreover, seasonal fluctuations in the consumer market are headwinds for Maxim’s top-line growth in the fiscal second-quarter 2019.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -14.41% due to these changes.
Currently, Maxim has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Maxim has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.