Altera Reiterates Guidance (ALTR)

Chipmaker Altera Corporation (ALTR) recently updated its guidance for the third quarter of 2012.

Altera expect revenue growth of 2% – 6% on a sequential basis, in line with the guidance provided with the second quarter results. This implies a revenue guidance of $437.5 million – $452.9 million.

Altera continues to see traction in the 28-nanometer node and expects revenue from this node to exceed $20 million in the third quarter. Revenue from 40-nanometer node is also expected to grow sequentially.

New products will be the growth drivers for the third quarter with sales of both 40nm and 28nm products estimated to be up substantially.

In July, Altera reported better-than-expected second quarter results. Altera reported a net income of $162.7 million or 50 cents per diluted share, which easily beat the Zacks Consensus Estimate of 39 cents per share.

This compared to a net income of $115.8 million or 35 cents per share in the first quarter of 2012 and a net income of $214.6 million or 65 cents per share in the year-ago quarter. Earnings estimates have moved up significantly after the release of its second quarter results.

Altera reported sales of $464.8 million in the second quarter of 2012, down 15% year over year but up 21% sequentially.

Reported revenues were better than management’s guidance of $437.5 million – $452.9 million.

Altera returned to sequential quarterly growth after three quarters of pullback in customer inventory. Most customers ended their inventory destocking programs and returned to their normal purchase levels.

Altera posted solid growth from both 28 and 40 nanometer products. 28-nanometer posted a massive 166% sequential growth. 40 nanometer posted a 42% sequential growth accounting for 28% of total revenue. Revenues from nine out of the eleven submarkets registered growth in the quarter.

As expected, telecom, wireless, networking, and computer, storage reported double-digit sequential growth. Industrial growth was just below 10% as Europe was slightly softer than expected.

We continue to maintain a Neutral recommendation on Altera Corporation. Nevertheless, we have a Zacks #2 Rank on the stock, which translates into a short-term rating of Buy.