Cirrus Logic - Momentum
Shares of fabless semiconductor company Cirrus Logic, Inc. ( CRUS ) have moved toward its 52-week high since providing a solid outlook during its first quarter results. This Zacks #1 Rank (Strong Buy) could improve even further based on its projection for solid revenue growth in the second quarter of fiscal 2013.
Mixed 1Q, Outlook Upbeat
On July 30, 2012, Cirrus Logic reported first quarter 2013 earnings per share of 16 cents, in line with the Zacks Consensus Estimate. Net sales increased 7.3% over the comparable prior-year quarter to $99.0 million, slightly below the Zacks Consensus Estimate of $101.0 million.
Revenue growth, which was within the company's guided range, was affected by lower-than-expected sales of Apple's iPhone, iMac and iPod. The company also stated that customers preferred to delay their purchases to wait for upcoming launches.
Gross margin improved 230 basis points (bps) from the year-ago quarter to 54.0%. However, operating margin decreased 490 bps to 10.6% due to higher expenses.
Based on upcoming audio and energy products, Cirrus Logic is upbeat about its growth in the second quarter and in fiscal 2013. The company expects second quarter revenue in the range of $170.0 million - $190.0 million, which reflects sequential growth of 71.7% - 91.9%.
Based on the new launches and higher sales of mobile devices and SSDs (solid state drives), Cirrus Logic forecasts solid growth for the rest of fiscal 2013.
Following the earnings release, the Zacks Consensus Estimate for the second quarter nearly doubled (up 91.2%) to 65 cents per share, while the Zacks Consensus Estimate for fiscal 2013 shot up 53.4% to $2.27.
Valuation Looks Reasonable
Currently, Cirrus Logic is trading at a premium to most of its peers based on P/E, P/S and PEG. Since its return on equity (ROE) of 19.1% is much higher than the 11.2% average for its peers, the premium is justified. Moreover, its strong growth prospects indicate room for further expansion.
Cirrus Logic shares have appreciated 74.9% in the past 6 months compared to a mere 2.2% increase for the S&P 500.
Shares have traded at a premium to its rivals, Texas Instruments Inc. ( TXN ), STMicroelectronics ( STM ), ON Semiconductor ( ONNN ) and Maxim Integrated Products ( MXIM ) in the past 6 months.
The significant increase in the stock price is on account of strong demand for its analog and mixed-signal integrated circuits (IC) for audio products, as well as its close association with Apple, its largest customer. The stock is currently above its 50 and 200 day moving averages of 34.44 and 27.75, respectively.
Trading volumes are considerably lower than its peers.
Incorporated in 1984 and headquartered in Texas, California, 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.
Cirrus Logic 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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