Markets

Xilinx (XLNX) Q3 Earnings, Revenues Top Estimates, Up Y/Y

Xilinx Inc.XLNX reported better-than-expected results in the third-quarter of fiscal 2017. The top and the bottom line also witnessed impressive year-over-year improvement.

The company's earnings (including stock-based compensation but excluding all other one-time items) of 52 cents per share came ahead of the Zacks Consensus Estimate of 49 cents. The figure also increased 6.1% from the year-ago quarter on the back of strong top-line growth and effective cost management.

Revenues

Xilinx reported fiscal third-quarter revenues of approximately $585.7 million, up 3.4% year over year and above the Zacks Consensus Estimate of $579 million. The quarter marked the fifth consecutive quarter of revenue growth. On a sequential basis, the company's revenues grew roughly 1.1%.

The robust revenue growth was mainly driven by strong sales of the company's 16nm Ultrascale+, 20nm Ultrascale, and 28nm Zynq products. Moshe Gavrielov, Xilinx President and Chief Executive Officer said that "The growth from these products was driven by a broad base of markets such as data center, automotive, test & measurement, wired and wireless communications and space".

Furthermore, the company's wireless business rebounded, mainly driven by 4G business in China and India as well as pre-5G deployment.

On the basis of End Market, sales at the Communications & Data Center division increased 4% from the prior-year quarter and 7% sequentially. Sales at the Industrial, Aerospace & Defense division increased 5% on a year-over-year basis and 1% sequentially. However, revenues at Broadcast, Consumer & Automotive decreased 2% year over year and 13% sequentially.

Product-wise, revenues from Advanced products increased a whopping 30% year over year and 2% sequentially, driven mainly by strong sales of 28-nm, 20-nm and 16-nm products. On the other hand, as expected, revenues from core products declined 12% from the year-ago quarter. However, it remained flat sequentially.

Geographically, on a year-over-year basis, revenues from Europe and Asia-Pacific increased 13% and 9%, respectively. On the other hand, revenues from Japan and North America declined 14% and 3%, respectively, on a year-over-year basis.

Margins

Xilinx reported a 70 basis point (bps) contraction in adjusted gross margin on a year-over-year basis to 69.6%. Also, reported gross margin was above the company's guidance of 69%.

Adjusted operating expenses increased 7.6% to $243 million as the company continues to strategically increase its investments in R&D. Moreover, as a percentage of revenues, operating expenses amounted to 41.5%, reflecting a 160 bps year-over-year increase. On a reported basis, the company's operating expenses were $244.5 million, which was almost in-line with its own expectations of $245 million.

Adjusted operating income of $164.4 million remained almost flat when compared with the year-ago quarter. However, adjusted operating margin contracted 100 bps as the benefit from improved gross margin was more than offset by higher operating expenses as a percentage of revenues.

Adjusted net income for the quarter came in at $143.3 million compared with $134.2 million.

Xilinx, Inc. Price, Consensus and EPS Surprise

Xilinx, Inc. Price, Consensus and EPS Surprise | Xilinx, Inc. Quote

Balance Sheet, Cash Flow & Shareholders' Return

Xilinx exited the quarter with cash and cash equivalents, and short-term investments of approximately $3.25 billion, compared with $3.49 billion in the previous quarter. The company has total long-term debt (long-term debt plus current portion) of about $994.8 million.

During the quarter, Xilinx generated cash of $105.6 million from operations and incurred $19.9 million as capital expenditure. Moreover, the company paid $83.3 million as cash dividends and repurchased shares worth $213.1 million during the quarter.

In the first three quarters of fiscal 2017, Xilinx generated cash of $627.8 million from operations and incurred $51.8 million as capital expenditure. Moreover, the company paid $250.7 million as cash dividends and repurchased shares worth $414 million during the first nine months of the current fiscal.

Concurrent with fiscal third-quarter results, Xilinx announced that its board of directors has approved a quarterly cash dividend of 33 cents per share. The raised dividend will be paid on Feb 23 to shareholders of record date as on Feb 8.

Guidance

For the last quarter of fiscal 2017, the company expects revenues in a range $590 million to $620 million (mid-point $605 million). The mid-point of the company's guidance for the fourth quarter is below the Zacks Consensus Estimate of $610.28 million.

Gross margin is anticipated to be in between 68% and 70%. Operating expenses are likely to be around $244 million, which includes approximately $1 million of amortization of acquisition-related intangibles. Effective tax rate stands at approximately 14%.

Our Take

Keeping its earnings streak alive for the eleven successive quarters, Xilinx once again reported better-than-expected results, surpassing the Zacks Consensus Estimate on both counts. Also, the company's top and bottom line both increased year over year.

However, the company's revenue guidance for the fourth quarter was slight disappointing as it fell short of our estimate at the mid-point.

Nonetheless, increasing demand for 28-nm, 20-nm and 16-nm nodes, driven by higher wireless deployments and strength in the wired communication segment, are expected to remain growth drivers. The company's new product launches should further aid revenues.

Notably, the California-based chipmaker has outperformed the Zacks categorized Semiconductor-Pro Logic Device industry in the last one year. In the said period, shares of Xilinx gained 27.8%, outperforming the Semiconductor-Programmable Logic industry's gain of 22.4%.

Stocks to Consider

Currently, Xilinx has a Zacks Rank #2 (Buy). Some other better-ranked stocks in the broader technology sector are STMicroelectronics STM , Check Point Software CHKP and Zendesk ZEN , all carrying a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

STMicroelectronics, Check Point Software and Zendesk have a long-term expected earnings growth rate of 12.5%, 10% and 24.3%, respectively.

Zacks' Best Private Investment Ideas

In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?

Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Zendesk, Inc. (ZEN): Free Stock Analysis Report

Check Point Software Technologies Ltd. (CHKP): Free Stock Analysis Report

STMicroelectronics N.V. (STM): Free Stock Analysis Report

Xilinx, Inc. (XLNX): Free Stock Analysis Report

To read this article on Zacks.com click here.

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


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

In This Story

CHKP STM ZEN XLNX

Other Topics

Earnings Stocks

Latest Markets Videos

    Zacks

    Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

    Learn More