Maxim’s Q2 Report Tops Estimates

Maxim Integrated (NASDAQ:MXIM) released second quarter earnings of fiscal year 2015 on January 22nd. The semiconductor company’s report topped estimates, despite posting a loss per share.

Highlights from the report include net revenue of $567 million, beating analyst estimates of $560.5 million. This net revenue was a 2% sequential decrease and a 9% year-over-year decrease. More than half of the revenue was derived from the consumer and industrial sectors of the company, though the industrial sector posted a sequential decrease due to “normal seasonal trends.”

Maxim posted diluted earnings loss per share of a loss of ($0.25) on a GAAP basis. The company attributed the loss to “pre-tax special items” such as “$138 million in charges related to impairment of goodwill and other assets related to our MEMS business, $28 million in charges related to restructuring activities and $23 million in charges related to acquisitions.”

Looking forward, Maxim forecasts that third fiscal quarter of 2015 will bring revenue of $565 million to $605 million and earnings per share of $0.20 to $0.26 on a GAAP basis. Maxim is expected to be a prominent supplier of chips for the Apple Watch, triggering analysts to adjust estimates for the third quarter.

President and CEO Tunc Doluca commented, “We are pleased with our December quarter revenue performance, driven by our diversification in Consumer and continued strength in our Automotive business. We are on track to achieve our previously announced cost reduction plans, which will enable us to reduce spending while we focus investment in our growth businesses. We also decided to stop investment in Consumer MEMS and Touch technology.” Zack’s estimates that stopping investments in these two sectors with save between $3 million and $4 million in costs, in addition to streamlining costs, increasing profitability, and driving margins.

According to AnalystRatings, analyst Ross Seymore of Deutsche Bank reiterated a Buy rating on Maxim Integrated with a price target of $37 on January 23rd. Seymore commented in light of the Q2 report, noting, “MXIM posted refreshingly solid results and issued a strong guide, reflecting progress in its diversification efforts and stability with Samsung.” Samsung is one of Maxim’s largest customers, causing Samsung’s recent volatility to impact Maxim’s bottom line. The analyst continued, “With appreciable tailwinds in Consumer (Samsung GS6, Apple Watch launches), Automotive, and Industrial (seasonal strength) coupled with ongoing cost-cutting progress (stopping MEMS investment, closing San Jose fab), the [company] should see continued improvements in profitability and earnings power in CY15/16.”

Ross Seymore has an 83% overall success rate recommending stocks with a +29.7% average return per recommendation.



Separately on January 23rd, analyst John W. Pitzer of Credit Suisse reiterated a Neutral rating on Maxim and raised his price target to $35 from $32. Pitzer noted that Maxim’s latest report was “the strongest group results [quarter to date] and the first beat/raise for the Company since [Q3] 2012.” The analyst continued, “While MXIM’s broad-based exposure is a good barometer for overall Semis in general and Analog specifically – upside is also company specific – Samsung headwinds have ceased, Apple Watch ramp has commenced, I/A/I continues to perform and restructuring actions beginning to bear fruit.” Looking forward, Pitzer is optimistic about wearables, specifically for the Apple Watch, noting that “the reversal of topline fortune NT in combination with expected margin leverage from restructuring is a welcome start to 2015.”

John Pitzer has a 74% overall success rate recommending stocks with a +22.9% average return per recommendation.



On average, the top analyst consensus for MXIM on TipRanks is Hold.