Infineon's (IFNNY) Q1 Earnings Miss Estimates, Revenues Beat

Infineon Technologies AG (OTC:IFNNY) reported first-quarter fiscal 2018 adjusted earnings of 24 cents per share, missing the Zacks Consensus Estimate by a couple of cents. However, the figure increased 17.6% on a year-over-year basis.

Revenues increased 7.9% year over year to $2.09 billion in the quarter, beating the Zacks Consensus Estimate of $2.08 billion. The top-line growth came on the back of strong sales in three of the company’s four business segments, namely Automotive (ATV), Industrial Power Control (IPC) and Power Management & Multimarket (PMM).

The quarterly results demonstrated Infineon’s strong growth prospects in the automotive market (43.4% of total revenues). The company’s products are currently used by eight of the top-10 electric vehicle makers including the new Audi A8, the new NIO ES8 SUV, Tesla (NASDAQ:TSLA) and BMW.

Quarter Details

ATV revenues increased 9.2% year over year to $906.9 million and noted persistent strong demand for driver assistance systems and electric drive train during the quarter. Moreover, management is elated that the world’s first Level3 autonomous driving car, the new Audi A8, features its RADAR ICs and several other semiconductors.

IPC revenues increased 12.1% year over year to $348.6 million. The segment is benefiting from strong demand in solar inverter solutions. However, a seasonal decline was witnessed by other primary areas.

PMM revenues increased 9.7% on a year-over-year basis to $641.9 million. Strong demand in AC/DC and DC/DC conversion were noticeable in the quarter. The RF power amplifier business remained stable but the Smartphone component business subsided.

However, Chip Card & Security (CCS) revenues declined 10.5% from the year-ago quarter to $190.8 million. The security controller market remains a headwind while the payment card market was stable.

Research & Development (R&D) and Selling, General & Administrative (SG&A) expenses as a percentage of revenues decreased 120 bps and 40 bps, respectively.

As a result, consolidated operating margin expanded 280 bps on a year-over-year basis to 14.0%.

Guidance

For fiscal 2018, revenues are revised to grow almost 5% (+/- 2%) against the fourth quarter fiscal 2017 guidance of 9% (+/-2%). Segment margins are projected to come in at 16.5% at mid-point of guidance.

ATV segment revenues are expected to grow above, while PMM revenues are projected to grow below the company’s growth average. IPC revenues are anticipated to grow in line with the company’s average. CCS revenues are expected to decline in lieu of difficult market situation and depreciation of US Dollar.

Second-quarter fiscal 2018 revenues are expected to decline 2% (+/- 2%). At the mid-point of revenue guidance, the segment result margin is expected to come in at 16%.

Zacks Rank & Other Stocks to Consider

Infineon carries a Zacks Rank #3 (Hold).

A few better ranked stocks in the broader technology sector are Micron Technology (NASDAQ:MU) , Lam Research (NASDAQ:LRCX) and The Trade Desk (NASDAQ:TTD) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Micron, Lam Research and The Trade Desk is projected at 10%, 14.85% and 25%, respectively.

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