A month has gone by since the last earnings report for Xilinx (XLNX). Shares have lost about 1.8% in that time frame, underperforming the S&P 500 .
Will the recent negative trend continue leading up to its next earnings release, or is Xilinx due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Xilinx reported better-than-expected fiscal first-quarter 2019 results wherein both the top and the bottom line surpassed the Zacks Consensus Estimate and recorded year-over-year improvement.
The company reported earnings of 74 cents per share, which beat the Zacks Consensus Estimate by a penny and were much higher than the prior-year quarter's figure of 59 cents.
Revenues increased 14% year over year to $684.4 million and outpaced the Zacks Consensus Estimate of $672.2 million as well.
Product wise, Advanced product revenues jumped 21% year over year, contributing 56% to total revenues. Revenues from core products (44% of total) increased 5% from the year-ago quarter.
Management noted that the company's first and second generation Zynq products hit a new sales record in the quarter, growing 76% from the year-ago quarter, driven by robust demand in automotive, industrial, communications, and Data Center markets. The Zynq SoC Platform, which includes Zynq at 28nm and both MPSoC and RFSoC at 16nm, now contributes 17% of total revenues.
Sales of 20-nm node soared 30% year over year in the reported quarter. Xilinx noted that the sales of 16-nm node increased more than 2.5 times.
On the basis of end markets, Communications revenues (31% of total revenues) declined 7% year over year. Industrial, Aerospace & Defense segment revenues (33% of total revenues) climbed 30% on a year-over-year basis. Broadcast, Consumer & Automotive revenues (16% of total revenues) increased 13% year over year.
The new reporting segment, Data Center and Test, Measurement & Emulation (TME) (19% of total) grew 11% from the year-ago quarter. Key design wins from hyperscalers globally for accelerating applications beyond FPGA as a Service (FaaS) drove results.
However, due to decline in cryptocurrency and expected decline in TME, Data Center and TME segment fell 20% sequentially. Communication segment revenues were up 7% from the prior quarter driven by strong growth in both wired and wireless, which offset the impact of ZTE.
Geographically, the company registered year-over-year growth in every region. Revenues from North America, Europe, Japan and Asia Pacific were up 12%, 14%, 12% and 15%, respectively.
Gross margin expanded 150 basis points (bps) year over year to 69.8%.
Research & development and selling, general & administrative expenses, as a percentage of revenues, declined 40 bps and 160 bps, respectively.
Operating expenses as a percentage of revenues declined 200 bps to 38.3%.
The company posted operating income of $215.8 million, up 27.6% year over year. Operating margin expanded 350 bps to 31.5%.
Balance Sheet, Cash Flow & Shareholders' Return
Xilinx exited the reported quarter with cash, cash equivalents and short-term investments of approximately $3.36 billion compared with $3.45 billion recorded in the previous quarter.
The company has total long-term debt (excluding current portion) of about $1.207 billion, down from $1.214 billion reported in the previous quarter.
Xilinx generated cash of $176.2 million from operations compared with $242.3 million in the previous quarter.
The company paid $91 million in dividends and repurchased approximately 2.1 million shares for $137 million. The company has approximately $570 million remaining in repurchase authorizations.
For second-quarter fiscal 2019, Xilinx projects revenues in the range of $700-$720 million.
Management expects Data Center and TME to grow significantly. Communications is expected to increase, with strong wireless revenue growth to more than offset a slight decline in wired revenues. Early 5G deployment activity in Korea and the withdrawal of the denial order on ZTE will be tailwinds.
On the other hand, Automotive, Broadcast and Consumer is expected to be approximately flat. Industrial, Aerospace & Defense is expected to decline.
Gross margin is expected to be around 69.5%. Operating expenses are projected to be $279 million. Tax rate is estimated between 10% and 14%.
For fiscal 2019, Xilinx projects revenues in the range of $2.8-$2.9 billion (mid-point $710 million).
The company expects strong growth from Data Center, TME, Industrial, and Communications. Wireless is expected to grow significantly with early 5G production deployments and the anticipated recovery of business with ZTE. The company is also witnessing an increase in wired infrastructure deployment in concurrence with the 5G ramp.
Gross margin is expected to be between 68.5 and 70.5%. Operating expenses are projected to be in the range of $1.12-$1.14 billion.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted 5.95% due to these changes.
Currently, Xilinx has a subpar Growth Score of D, however its momentum is doing a lot better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
The company's stock is suitable solely for momentum based on our style scores.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Xilinx has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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