Maxim Integrated Products, Inc. MXIM reported fourth-quarter fiscal 2018 adjusted earnings of 73 cents per share, surpassing the Zacks Consensus Estimate by 3 cents. Also, earnings increased 16% from the year-ago quarter but were flat sequentially.
Coming to price performance, shares of Maxim have returned 34.1% in the past 12-month period, outperforming the industry’s growth of 9.6%.
Revenues
Revenues of $633 million decreased 2% sequentially but increased 5% year over year. The increase was driven by major strength in automotive, industrial and data center markets.
The top line was within the company’s guided range of $610-$650 million but surpassed the Zacks Consensus Estimate of $631 million.
Revenues by End Market
The revenue mix in terms of major markets is discussed below.
The Industrial end market remained the largest revenue contributor, accounting for approximately 30%. The segment’s revenues increased 13% from the prior-year quarter, driven primarily by factory automation products, content growth in medical and broad market initiatives.
Consumer, Maxim’s second-largest segment, also generated 24% of revenues, down sequentially but up from the year-ago quarter.
The Communications and Data Center end market accounted for 20% of the revenues, up sequentially, driven by robust growth of 100G optical products.
The Automotive end market generated 22% of revenues. The segment’s revenues grew 20% year over year. The increase was driven by growth in infotainment content, battery management systems for electric vehicles and driver assistance content.
The Computing business contributed the remaining 4%.
Margins
Non-GAAP gross margin was 68%, up 80 basis points both sequentially as well as year over year. The increase was due a favorable mix and strong operational execution.
Non-GAAP operating expenses of $194.7 million decreased 0.5% sequentially but increased 2.9% year over year. Operating margin was 35.1%, up significantly from the prior-year quarter. The improvement was driven by revenue growth and manufacturing transformation.
Balance Sheet & Cash Flow
During the quarter under review, cash flow from operations was $146.7 million compared with $223 million in the last reported quarter. Important usages of cash in the quarter included $12.1 million on capex, $128 million for share repurchases and $117.3 million paid as dividends.
Total cash, cash equivalents and short-term investments were $2.63 billion in the fiscal fourth quarter, down from $2.72 billion in the last reported quarter.
During the quarter, the company increased its dividend by 10% to 46 cents per share.
Guidance
For fiscal first quarter, Maxim expects revenues in the range of $615-$655 million based on a quarter-end backlog of $441 million. The Zacks Consensus Estimate is pegged at $630.3 million.
Gross margin is expected within 66.5-68.5% on an adjusted basis (excluding special items). Earnings per share are expected in the range of 72-78 cents on an adjusted basis. The Zacks Consensus Estimate stands at 70 cents.
Going Forward
For fiscal first quarter, the company expects the automotive market to be flat sequentially but up in high teens year over year. The year-over-year strength is driven by power management products for infotainment, continued momentum in battery management system business and ADAS products. The industrial market will be down sequentially but up from the year-ago quarter, driven by strength in factory automation content. The Communications and Data Center market is likely to be flat sequentially but up from the year-ago quarter, driven by 100G optical products for high-speed rack to rack connectivity.
However, Consumer revenues are expected to increase in fiscal first quarter but remain flat year over year.
Maxim’s automotive business has been growing lately. The company invested heavily in vehicle-safety technology that could prove to be foundational for a driverless car future. Maxim’s ASIL compliant battery management system is gaining strong adoption in the industry.
Maxim remains financially strong with convincing margin expansion opportunities through its cost-saving initiatives and R&D focus on high-return investments.
The company is expanding its manufacturing footprint to enhance flexibility and profitability, while lowering capital expenditure. Management also plans to optimize product lines and organization for better returns on R&D investments. These efforts are likely to enable Maxim in improving future utilization rates, reducing costs and improving gross-margin performance.
Maxim is shifting to advanced node process technology development through a recent collaboration with its foundry partners. Products launched under this initiative should expand its margins.
Maxim Integrated Products, Inc. Price, Consensus and EPS Surprise
Maxim Integrated Products, Inc. Price, Consensus and EPS Surprise | Maxim Integrated Products, Inc. Quote
Zacks Rank &Other Stocks to Consider
Maxim sports a Zacks Rank #1 (Strong Buy). Other top-ranked stocks in the same industry include Groupon GRPN, IAC/InterActiveCorp IAC and Analog Devices, Inc. ADI. While Groupon and IAC/InterActiveCorp sport a Zacks Rank #1, Analog Devices holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth for Groupon, IAC/InterActiveCorp and Analog Devices is currently projected to be 3%, 7.5% and 12.4%, respectively.
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