) reported earnings of 41 cents per share in the second-quarter of
2014, which beat the Zacks Consensus Estimate of 37 cents. Earnings
also increased 29.1% on a year-over-year basis, primarily due to a
higher revenue base and lower share count.
Altera Corporation - Earnings Surprise |
Altera's second-quarter revenues not only increased 16.5% on a
year-over-year basis to $491.5 million, but also came ahead of the
Zacks Consensus Estimate of $479.0 million.
The year-over-year increase was mainly attributable to growth in
new product revenues (53.0% of total revenue), which increased
53.0% year over year and offset the 11.0% decline in mainstream
revenues and a 5.0% decline in Mature and Other markets. New
product revenues were primarily driven by robust performance in its
28-nm process node and 40-nm products.
Revenues from FPGA (84.0% of total revenue) increased 18.0% on a
year-over-year basis. Revenues from CPLD and other products, which
constitute 8.0% of total revenue each, increased 7.0% and 12.0%,
By verticals, all except the Networking, Computer & Storage
(15.0% of total revenue) increased on a year-over-year basis. The
Networking, Computer & Storage segment witnessed a decline of
6.0%. Telecom & Wireless (46.0% of total revenue) increased
28.0% from the year-ago quarter, primarily due to LTE deployments
in the U.S., Europe, South Korea and Japan, and China Mobile LTE
deployment. Industrial Automation and Military & Automotive
markets, which comprised 21.0% of second-quarter revenues,
increased 14.0% from the year-ago quarter. Other segment (18.0% of
total revenue) increased 16.0% from the year-ago period.
By geography, Asia Pacific grew 28.0% on a year-over-year basis,
whereas revenues from EMEA and Americas increased 13.0% and 9.0%,
respectively. Revenues from Japan increased 3.0% on a
Altera reported gross margin of 66.9%, which was down 101 basis
points (bps) from the year-ago quarter, primarily due to an
unfavorable product mix.
Operating margin came in at 29.8%, up from 26.6% in the year-ago
quarter. Total operating expenses increased 4.7% year over year,
reflecting a 5.9% rise in research and development expenses and a
1.4% increase in selling, general, and administrative expense. As a
percentage of revenues, operating expenses contracted 418 bps to
37.1% from the year-ago quarter, which favorably impacted margins.
Reported net income was $127.0 million or 41 cents per share
compared with $101.5 million or 31 cents per share in the second
quarter of 2013. Including gain on securities and gain from the
reclassification, net income was $141.4 million compared with $92.4
million in the year-ago quarter.
Balance Sheet & Cash Flow
Altera exited the quarter with cash and short-term investments
balance of $2.81 billion compared with $2.91 billion in the
previous quarter. Long-term debt amounted to $1.49 billion. The
company generated cash flow from operating activities of $301.4
During the quarter, Altera repurchased approximately 6.0 million
shares at a cost of $197.0 million and announced a cash dividend of
18 cents to be paid on Sep 2, 2014.
Altera expects sales to increase in the range of (2.0%) to 2.0%,
sequentially ($481.7 million to $501.3 million) in the third
quarter. The Zacks Consensus Estimate is pegged at $481.0 million.
Also, the company is positive about its 28-nanometer revenues in
the forthcoming quarter.
Management expects revenues from Telecom & Wireless to be flat,
sequentially. Industrial Automation, Military & Automotive
revenues are also expected to be flat, sequentially. However,
Networking, Computer & Storage revenues are expected to
increase quarter over quarter.
Management projects gross margin of roughly 67.0% in the third
quarter. Research and development expenses are expected in the
range of $114.0 million to $116.0 million, while selling, general
and administrative expenses will likely range between $78.0 million
and $80.0 million. Tax rate is expected in a range of 11.0% to
Altera has delivered better-than-expected second-quarter 2014
results. Both revenues and earnings increased on a year-over-year
basis, primarily aided by strong growth in its 28nm process node
and constant development from its 40 nm products. Moreover, the
company provided an encouraging third-quarter revenue guidance.
Also, growth in 4G/LTE deployments in particular will increase
demand for FPGAs, which will be beneficial for Altera.
Additionally, Altera's transition to 14nm FPGAs in association with
Intel Corp. (
) is likely to be a competitive differentiator.
Altera is currently manufacturing its chips using 28-nanometer
nodes. We believe that the deployment will help Altera to
strengthen its product portfolio and offer more comprehensive and
high-value programmable solutions.
Moreover, the continued share buybacks are expected to support the
company's bottom line, going forward.
However, macroeconomic weakness, competition from Xilinx Inc. (
) and Lattice Semiconductor Corporation (
), consolidation in the telecom market, declining margins and
volatility in the semiconductor market are concerns.
Currently, Altera holds a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research?
Today, you can download 7 Best Stocks for the Next 30 Days.
Click to get this free report
INTEL CORP (INTC): Free Stock Analysis Report
ALTERA CORP (ALTR): Free Stock Analysis Report
XILINX INC (XLNX): Free Stock Analysis Report
LATTICE SEMICON (LSCC): Free Stock Analysis
To read this article on Zacks.com click here.