announced preliminary third quarter results on January 15, 2013.
For the quarter ended December 30, 2012, the company expects to
report GAAP earnings per share ("EPS") in the range of 14 cents
to 15 cents.
Excluding stock-based compensation, acquisition related
charges and related tax effect, the company expects EPS to be in
the range of 19 cents to 20 cents, significantly higher than its
previously forecasted range of 14 cents to 19 cents. However, EPS
is likely to decline significantly from 34 cents reported in the
year-ago quarter but rise slightly from 18 cents reported in the
QLogic expects net revenue of approximately $119.0 million,
slightly higher than its previously forecasted range of $112.0
million to $118.0 million. Revenue is expected to beat the Zacks
Consensus Estimate of $115.0 million driven by strong performance
from Host Products and Network products business segment.
However, third quarter estimated revenue declines
significantly from $142.8 million reported in the year-ago
quarter and remains flat sequentially. We believe that this
shrinking revenue growth continues to reflect declining
enterprise data center spending and sluggish macro-economic
We note that QLogic has outperformed the Zacks Consensus
Estimate by an average of 16.3% over the trailing four quarters.
Although the Zacks Consensus Estimate was revised down by 7 cents
over the last 90 days, QLogic's preliminary result suggests
another beat is on the cards.
Currently, the Zacks Consensus Estimate is pegged at 9 cents
per share for the third quarter. Our pro forma calculations
differ from management's presentation as we exclude
acquisition-related costs but include stock-based compensation
expense and related tax effect.
Despite the imminent earnings beat, we prefer to remain
cautious on the stock due to its lackluster margin outlook.
Previously, QLogic had forecasted gross margin to be
approximately 57.0% to 58.0% for the third quarter. This reflects
a significant contraction from 68.5% reported in the year-ago
quarter and 67.6% in the previous quarter.
The company also intends to spend approximately $60.0 million
on operating expenses. We believe that increasing investments on
engineering and stiff competition from peers such as
will hurt profitability going forward.
Currently, QLogic has a Zacks Rank #4 (Sell).
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