Linear Tech Beats Q4 Earnings Estimate - Analyst Blog

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Linear Technology Corp. ( LLTC ) reported fourth-quarter 2013 earnings of 44 cents, surpassing the Zacks Consensus Estimate of 42 cents.

Revenue

Linear reported revenues of $327.3 million, up 4.0% sequentially but down 0.8% year over year, in line with the higher end of management's guidance range of 1-4% sequential increase. The sequential increase was led by improved sales into automotive and industrial markets.

Book-to-bill ratio was greater than 1 in the quarter.

Margins

Gross margin for the quarter was 75.2%, up 35 basis points (bps) sequentially and down 23 bps from the comparable quarter of the prior year.

Operating expenses of $98.9 million were up 2.0% from the previous quarter's $97.0 million. Operating margin of 44.9% expanded 90 bps sequentially owing to a slight decline in research and development (R&D) as well as selling, general and administrative (SG&A) expenses (as a percentage of sales).

Net income for the quarter was $101.9 million or 31.2% of sales compared to $111.0 million or 35.3% in the previous quarter and $103.3 million or 31.3% of sales in the year-ago quarter. Earnings, including a couple of cents of debt discount amortization, were 44 cents, down from 48 cents in the previous quarter and 45 cents in the June quarter of 2012.

Balance Sheet

Inventories increased 0.8% sequentially, with inventory turns staying relatively flat at 3.7X. Days sales outstanding (DSOs) was flat at 41. The company ended with cash and short-term investments of $1.52 billion, up $70.2 million during the quarter.

Management repurchased 944000 shares worth $34.0 million and declared a cash dividend of 26 cents, which will be paid on Aug 28, 2013.

Guidance

Management provided limited guidance for the first quarter of fiscal 2014. Revenues are expected to increase 2-5%, much better than normal seasonality. The improved revenue guidance reflects better book-to-bill ratio.

Conclusion

Linear's fourth-quarter earnings were helped by a positive mix. Lower-margin segments softened while higher-margin segments grew strongly. The company's business is well-diversified among core markets, such as industrial, automotive and communications infrastructure. However, its computing business has been hit by weakness in the PC and notebook areas.

Another positive is the extreme caution that distributors have shown in recent times, which indicates that distributor inventories remain very lean. Therefore, Linear should benefit from its operating leverage and lean channel inventories when demand picks up.

Linear carries a Zacks Rank #3 (Hold). Other semiconductor stocks that are worth considering include STMicroelectronics NV ( STM ), Microchip Technology Inc. ( MCHP ) and Intersil Corp. ( ISIL ), all carrying a Zacks Rank #2 (Buy).



INTERSIL CORP (ISIL): Free Stock Analysis Report

LINEAR TEC CORP (LLTC): Free Stock Analysis Report

MICROCHIP TECH (MCHP): Free Stock Analysis Report

STMICROELECTRON (STM): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: ISIL , LLTC , MCHP , STM

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