Cirrus Logic Inc.
(
CRUS
) delivered a more than 7% positive surprise in its fiscal second
quarter, which helped this fabless semiconductor company become a
Zacks #1 Rank (Strong Buy) on November 28. It also recently
announced authorization to buyback $200 million shares. CRUS has a
long-term projected growth rate of 15.0%.
Strong Revenue Boosts Second Quarter
On October 31, Cirrus Logic reported that fiscal second quarter
earnings surged 154.2% year over year to 71 cents per share, which
exceeded the Zacks Consensus Estimate by 7.58%. The key driver of
the surprise was solid revenue growth.
Revenue jumped 90.7% from last year to $193.8 million, well above
the Zacks Consensus Estimate of $180.0 million.
Better-than-expected growth was driven by the 112.6% year-over-year
improvement in Audio Product revenues. Revenue from this segment
increased on the back of higher sales for Apple Inc.'s (
AAPL
) iPhone 5, which had a solid backlog in the preceding quarter.
Management provided an upbeat outlook for the third quarter.
Revenue is expected between $270.0 million and $300.0 million, with
gross margin in the 50.0% to 52.0% range and operating expenses of
$49.0 million to $52.0 million. The solid revenue projection was
due to strong demand for its analog and mixed-signal integrated
circuits for audio products.
Earnings Estimates Move Higher
The past 60 days have seen 3 out of 4 estimates revised higher for
both fiscal 2013 and fiscal 2014. For the current fiscal year, the
Zacks Consensus Estimate has jumped 36.6% to $3.21. For next fiscal
year, the Zacks Consensus Estimate is up 31.6% to $3.58.
Reasonable Valuation Currently, Cirrus Logic is trading at a
premium to most of its peers based on P/E, P/S and P/B. The premium
valuation seems justified given the company's solid earnings growth
prospects. Its earnings growth expectation of 15.0% over the next
five years compares favorably with the industry average of 13.6%,
indicating room for further expansion. Moreover, its return on
equity (ROE) of 24.3% is higher than the industry average of 20.0%.
Cirrus Logic designs ICs for the audio and energy markets. The
major contributor to the company's revenue is its audio product
portfolio. Audio products generate 85.0% of total revenue while
only 15.0% comes from Energy products. The company has a strong
customer base but its prime customer is Apple with revenue
contributions of 62.0% in 2012, 47.0% in 2011 and 35.0% in 2010.
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CIRRUS LOGIC (CRUS): Free Stock Analysis Report
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