Xilinx Tops Q1 Earnings; Shares Dip on Soft Revenue Outlook - Analyst Blog

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Xilinx Inc.  ( XLNX ) reported adjusted earnings per share of 62 cents in the first quarter of fiscal 2015, which beat the Zacks Consensus Estimate by a penny. Reported earnings increased 9.9% from the year-ago quarter.

Xilinx Inc - Earnings Surprise | FindTheBest

However, shares plummeted 9.14% in after-hours trade as the company issued tepid revenue guidance for the September quarter.

Quarter Details

Xilinx's revenues of $612.6 million were up 5.8% on a year-over-year basis. The year-over-year increase was due to 20.0% improvement in revenues from Communications & Data Center segment (50.0% of first-quarter fiscal 2015 revenues) primarily due to LTE deployments outside China. The company also witnessed higher shipment of 40-nanometer (nm) and 65-nm technology.

Xilinx also witnessed a 3.0% year-over-year growth in revenues from Broadcast, Consumer & Automotive (15% of first-quarter revenues) and revenues from Other sources, comprising 2.0% of total revenue, increased 11.0% year over year. However, revenues from Industrial, Aerospace & Defense segment (31.0% of first-quarter revenues) were down 11.0% year over year.

Geographically, revenues from North America were down 12.0% year over year while Asia Pacific and Japan increased 26.0% and 21.0% year over year, respectively. On the other hand, revenues from Europe were down 7.0% on a year-over-year basis.

Xilinx reported 16 basis points (bps) gross margin expansion year on year to 69.1%, primarily attributable to higher revenues and favorable product mix.

Adjusted operating expenses (excluding amortization) for the quarter increased 5.2% to $214.5 million but as a percentage of revenues, operating expenses were down 20 bps on a year-over-year basis. This positively impacted Xilinx's operating margins which increased 36 bps year over year.

Xilinx's adjusted net income for the quarter came in at $176.0 million or 62 cents compared with $159.4 million or 56 cents reported in the year-ago quarter.

Xilinx ended the quarter with cash, equivalents and short-term investments of $2.48 billion compared with $2.46 billion in the previous quarter. The company has long-term debt (long-term debt plus current portion) of $1.56 billion. Xilinx generated $130.0 million of cash from operations and incurred $9.0 million in capital expenditure. The company paid $77.0 million in cash dividends and repurchased shares worth $100.0 million.

Guidance

Management expects September quarter revenues in the range of (4.0%) to flat on a sequential basis, which comes to a range of $588.0 to $612.6 million range, lower than the Zacks Consensus Estimate of $643.0 million. This tepid revenue guidance was due to delay in China LTE deployments.  

Gross margin is forecast to be roughly 70.0%. Operating expenses are expected to be around $236.0 million, including approximately $2.5 million of amortization of acquisition-related intangibles. Share count is expected to be approximately 282 million and effective tax rate to be about 13.0%.

Xilinx also provided a glimpse of its fiscal 2015 expectations. The company expects revenues to increase 5.0% for the fiscal year buoyed by the 28-nm growth opportunities. The company also expects its December and March quarters to be positively impacted by wireless sales in China.

Management also expects gross margins to remain in the range of 68.0% to 70.0% while the operating expenses to be lower due to operating efficiencies. The company stressed the importance of innovative product development and expects its research and development, and selling, general and administrative expenses to be $530.0 million and $380.0 million, respectively, for fiscal 2015.  

Conclusion

Xilinx reported better-than-expected first-quarter results. However, second-quarter revenue guidance was tepid. Nonetheless, the growing demand for 28-nm nodes driven by higher wireless deployments and strength in the wired communication segment are expected to remain the growth drivers. The company also expects a rebound in the Industrial, Aerospace & Defense sales. The company's product launches are also expected to boost revenues.

However, stiff competition from Altera Corp. ( ALTR ) and dwindling PC (significant consumer for semiconductor chips) market sales keep us concerned for the near term.

Currently, Xilinx has a Zacks Rank #2 (Buy). Investors may also consider other stocks, such as Arrow ( ARW ) and Avnet ( AVT ) with the same Zacks Rank as Xilinx.


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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: ARW , AVT , ALTR , XLNX

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