Shares of Xilinx Inc. (XLNX) plunged more than 6.5% in yesterday’s after-hour trading in response to the company’s lower-than-expected third-quarter fiscal 2015 revenues and a tepid fourth-quarter outlook.
However, the company’s earnings of 62 cents per share beat the Zacks Consensus Estimate of 60 cents and rose a penny from the year-ago quarter figure.
Quarter Details
Xilinx’s third-quarter revenues of $593.5 million witnessed a marginal 1% year-over-year growth but missed the Zacks Consensus Estimate of $617 million. The company’s soft top-line performance was mainly due to dismal sales at its communications, broadcast and other divisions.
The company’s sales at Communications & Data Center, Broadcast, Consumer & Automotive and Other divisions registered a year-over-year decline of 7%, 9% and 39%, respectively. However, Industrial, Aerospace & Defense division’s sales improved 18% from the year-ago quarter.
Geographically, revenues from North America were up 18% year over year, while that from Asia Pacific and Europe declined 2% and 16%, respectively. On the other hand, revenues from Japan rose 2% on a year-over-year basis.
Product-wise, Xilinx’s revenues from new products increased 14%, while the same from Mainstream, Base and Support products decreased 10%, 3% and 1%, respectively. However, the company registered sequential sales growth in all the product families, especially 28-nanometer (nm) registering 20% rise. Year-over-year, sales of 28-nm products jumped 50%.
Xilinx reported 54 basis points (bps) gross margin expansion year on year to 69.7%.
Operating expenses went up 10.1% to $223.9 million and, as a percentage of revenues, the same expanded 308 bps on a year-over-year basis. As a result, Xilinx’s operating margins contracted 254 bps year over year to 32%. In dollar terms, operating income decreased 6.3% to $190 million.
Xilinx exited the quarter with cash, equivalents and short-term investments of $2.92 billion compared with $2.59 billion in the previous quarter. The company has long-term debt (long-term debt plus current portion) of $1.57 billion. During the quarter, Xilinx generated $290.7 million of cash from operations and incurred $6.1 million in capital expenditures. The company paid $76.1 million in cash dividends and repurchased shares worth $175 million during the reported quarter.
Guidance
Management provided a tepid fourth-quarter outlook. The company expects revenues to decline in the range of 2% to 6% sequentially, translating into a $569 to $581 million range (mid-point $575 million). The Zacks Consensus Estimate is pegged at $639 million.
Gross margin is forecast to be between 68% and 69%. Operating expenses are expected to be around $227 million, which includes approximately $2.5 million of amortization of acquisition-related intangibles. Share count is likely to be approximately 270 million and effective tax rate about 13%.
Conclusion
Xilinx reported mixed third-quarter results wherein the bottom line beat the Zacks Consensus Estimate but the top line missed. Also, fourth-quarter revenue guidance was disappointing.
However, increasing 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 expected to boost revenues.
Nonetheless, delay in China LTE deployments and higher spending on research and development, and selling, general and administrative segments could impact the company’s near-term results. Also, stiff competition from Altera Corp. (ALTR) remains a headwind.
Stocks to Consider
Currently, Xilinx has a Zacks Rank #4 (Sell).Investors may also consider better-ranked stocks such as Avago Technologies Ltd. (AVGO) and Ambarella, Inc. (AMBA). Both companies sport a Zacks Rank #1 (Strong Buy).
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
Be the first to comment