Back to top

Image: Bigstock

Marvell (MRVL) to Report Q4 Earnings: What's in the Cards?

Read MoreHide Full Article

Marvell Technology Group Ltd. (MRVL - Free Report) is set to report fourth-quarter fiscal 2019 results on Mar 7.

The company surpassed the Zacks Consensus Estimate thrice in the trailing four quarters, missing it once, delivering average negative surprise of 2.02%.

Marvell reported fiscal third-quarter non-GAAP earnings of 33 cents, which declined 3% from the year-ago quarter but surpassed the Zacks Consensus Estimate of 32 cents.

Revenues increased 38.1% year over year to $851.1 million, and surpassed the consensus estimate of $845 million.

For the to-be-reported quarter, the company expects revenues in the range of $790-$830 million and earnings between 30 cents and 34 cents per share.

The Zacks Consensus Estimate for revenues is pegged at $739.9 million, indicating a year-over-year increase of 20.22%. The consensus mark for earnings is at 26 cents, projecting a decline of 18.8%.

Let’s see how things are shaping up prior to this announcement.

Factors at Play

Marvell is making strong progress in automotive, AI inference and cloud security with key design wins at several key customers. It anticipates low single-digit sequential revenue growth for the networking business in the to-be-reported quarter, driven primarily by a rise in demand in the service provider market for its embedded and baseband processors.

Marvell’s core switch, PHY and OCTEON family of high-end embedded processors are expected to sustain the uptrend in the to-be-reported quarter. The company’s automotive Ethernet business is also gaining traction.

The company expects Cavium business to contribute approximately $240 million to revenues in the fourth fiscal quarter.

The ARM server CPU business of the company is expected to continued its momentum with a number of cloud and high-performance computing customers qualifying the ThunderX2 processors. This evaluation process is expected to last another few quarters.

The company continues to improve its margins. For the to-be-reported quarter, Marvell expects to increase its non-GAAP gross margin to 65%, up from 64.6% from the last reported quarter, and reduce its operating expenses by 3.2% sequentially to $287.5 million.

However, as the company continues to shift away from older connectivity products, it expects the Wi-Fi business to seasonally bottom out in the to-be-reported quarter, post which it expects to grow with the ramping up of Wi-Fi 6.

It should be noted that Marvell faces significant competition from Broadcom (AVGO - Free Report) , which has already taken initiatives such as key collaborations in the Wi-Fi 6 space.

Furthermore, several factors continue to affect the company’s storage market, including CPU shortages, trade tensions, moderating cloud CapEx and increasing inventory at customers. Due to these headwinds, Marvell expects storage revenues to decline about 10% sequentially in the fourth quarter of fiscal 2019.

What Does the Zacks Model Say?

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. Stocks with a Zacks Rank #4 (Sell) or 5 (Strong Sell) are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Marvell currently has a Zacks Rank #3 and an Earnings ESP of -5.30%.

Stocks With a Favorable Combination

Here are two stocks, which per our model, have the right combination of elements to post earnings beat this quarter:

Momo Inc. (MOMO - Free Report) has an Earnings ESP of +1.55% and carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Mistras Group Inc (MG - Free Report) has an Earnings ESP of +4.76% and carries a Zacks Rank of 3.

Zacks' Top 10 Stocks for 2019

In addition to the stocks discussed above, wouldn't you like to know about our 10 finest buy-and-holds for the year?

From more than 4,000 companies covered by the Zacks Rank, these 10 were picked by a process that consistently beats the market. Even during 2018 while the market dropped -5.2%, our Top 10s were up well into double-digits. And during bullish 2012 – 2017, they soared far above the market's +126.3%, reaching +181.9%.

This year, the portfolio features a player that thrives on volatility, an AI comer, and a dynamic tech company that helps doctors deliver better patient outcomes at lower costs.

See Stocks Today >>
 

Published in