) is scheduled to announce its third quarter 2013 results on
November 8, 2012. In the run up to the earnings release, we
noticed some movement in the analysts' estimates.
Second Quarter Overview
Nvidia reported adjusted earnings per share of 20 cents, which
surpassed the Zacks Consensus Estimate by 5 cents. Total revenue
increased 1.9% year over year to $1.04 billion..
The company's GPU business was up 15.0% sequentially, due to a
surge in demand witnessed by the company's desktop segment, new
product offerings and growing notebook shares, as the industry
continues to move to the Ivy Bridge platform. While, the
Professional Business segment was down 8.0% sequentially due to
continued weak economic conditions in Europe and the slower ramp
up of Romley platform. Consumer business was up 36.0% on the
strength of the company's Tegra business.
Gross margin on a GAAP basis was 51.8% versus 51.7% in the
year-ago quarter. Efficient cost management and change in sales
mix of high-margin products led the gross margin to exceed the
For the third quarter of fiscal 2013, revenue is expected in
the range of $1.15 billion to $1.25 billion. GAAP and non-GAAP
gross margins are expected to remain flat sequentially at 51.8%
and 52.0%, respectively. Management expects GAAP operating
expenses to be roughly $390 million; while non-GAAP operating
expenses are projected roughly at $350 million.
Agreement of Analysts
A look at estimate revisions in the last 30 days shows some
negative sentiments, although there were minor revisions. Out of
the 26 analysts providing estimates for the third quarter, 2
analysts revised their estimates downward over the last 30
For fiscal 2013, 2 out of 26 analysts lowered their estimates,
while one analyst revised their estimate upward, over the last 30
days. Again for fiscal 2014, 4 out of 26 analysts revised their
estimate downward over the last 30 days, and none moved in the
opposite direction over the last 30 days.
Some analysts expect PC demand to remain tepid and NVIDIA is
not fully hedged from that. On the other hand, the share gains in
mobile network make NVIDIA the best PC-oriented semiconductor
Some analysts have the same opinion as the company, that the
Tegra offering is underappreciated by investors, with more
revenue generations from tablets / WinRT which may result in new
Tegra 4 offering in early 2013. If TSMC's commentary that
customers may balk at a 2013 move to 20nm given higher capital
costs proves correct, Tegra's advantage could have a longer tail
Some analysts believe that NVIDIA's Tegra chips for smartphone
and tablets are well positioned versus
) and others as they are of good quality and offered at a
competitive price. However, the largest vendors, Samsung and
), make their own processors and that is a negative factor.
Magnitude of Estimate Revisions
The Zacks Consensus Estimates for the third quarter have not
changed in the last 30 days, while the same increased by 9 cents
over the past 90 days to reach 30 cents. The Zacks Consensus
Estimates for fiscal years 2013 and 2014 dropped by 1 cent and 4
cents to reach 89 cents and $1.04, respectively over a period of
30 days. In the last 90 days, the Zacks Consensus Estimates
improved by 19 cents and 12 cents, respectively.
The company delivered modest second quarter results. Although
the decline in PC demand may affect the result of the upcoming
quarter, but new offerings from the company can help win new
Moreover, the acquisition of data chip manufacturer Icera will
add value to NVIDIA's product portfolio. Moreover, the newly
introduced NVIDIA PhysX technology will likely attract more
gaming customers. However, the company is concerned about the
fact that Tegra offering is underappreciated by investors.
NVIDIA's performance may be tempered slightly by the weak gaming
market, economic slowdown in Europe and increased
Currently, NVIDIA holds a Zacks #3 Rank, implying a short-term
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