Shares of Xilinx Inc. (XLNX) hit a new 52-week high of $50.37 on Feb 18, eventually closing at $50.32. The closing share price represents a one-year return of 28.6% and a year-to-date return of 9.5%. Average volume of shares traded over the last 10 days (5,548K) increased from the average volume of shares traded over the last three months (3,099k).
Xilinx delivered positive earnings surprises in the last three quarters with an average beat of 5.4%. This Zacks Rank #3 (Hold) company has a market cap of $13.39 billion and a long-term expected earnings growth rate of 12.5%.
Growth Drivers
The price appreciation can be attributed to the growing demand for Xilinx’s 28 nanometer (nm) field programmable gate array (FPGAs) driven by higher wireless deployments and strength in the wired communication segment. This has also enabled the company to surpass rival Altera Corp. (ALTR). During the third quarter of 2014, sales of these products came in at $100.0 million.
We believe that the company’s continued focus on margin expansion, cost reduction across its product portfolio and higher yield are positives. We also think that Xilinx’s product launches will boost revenues.
Xilinx reported mixed third-quarter results with the bottom line surpassing the Zacks Consensus Estimate but the top line missing. Both revenues and earnings increased on a year-over-year basis. Both the Industrial, Aerospace & Defense and Broadcast, Consumer & Automotive segments contributed to the year-over-year increase in the top line.
Xilinx provided a positive view for the fourth quarter on a sequential basis and expects favorable contributions from all end markets and the 28-nm portfolio. Xilinx also expects sales from mainstream products to be up on a sequential basis and its communications segment to continue to show strength due to the China LTE scenario. Considering all the above factors, Xilinx expects revenues to increase 2.0% to 6.0% on a sequential basis to $598.5 million–$622.0 million.
Additionally, we are encouraged by Xilinx’s endeavor to return shareholder value through continued share buybacks and dividend payouts. During the quarter, Xilinx repurchased shares worth $97.1 million and paid dividends of approximately $67.1 million to its shareholders. These investor-friendly initiatives not only boost earnings but also instill investor confidence and loyalty.
Estimate Revisions
Considering the growth potential and positive news flow, the Zacks Consensus Estimate for 2014 was up significantly over the past 30 days. Thirteen estimates for 2014 were raised over the last 30 days, while three estimates for the fourth quarter of 2013 were lowered during the same period of time.
Stocks That Warrant a Look
Better-ranked stocks in the technology industry that are currently performing well and also have good visibility include Lexmark International Inc. (LXK) with a Zacks Rank #1 (Strong Buy) and Hewlett-Packard Co. (HPQ) with a Zacks Rank #2 (Buy).
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