A month has gone by since the last earnings report for Maxim Integrated Products, Inc. (NASDAQ:) . Shares have added about 6.8% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Maxim Beats Q1 Earnings Estimates, Outlook Strong
Maxim reported first-quarter fiscal 2018 adjusted earnings of 60 cents per share, surpassing the Zacks Consensus Estimate by 5 cents. Also, earnings were up 25.0% from the year-ago quarter.
The results were driven by strong growth in automotive and industrial markets. The company’s strong outlook for the upcoming quarter also led to the spike in the share price.
Revenues
Revenues of $576 million were down 4.4% sequentially but up 2.5% year over year. The year-over-year increase was driven by major strength in the automotive and industrial end markets.
The top line was within the company’s guidance range of $555-$595 million and above the Zacks Consensus Estimate of $575 million.
Revenues by End Market
The revenue mix in terms of major markets is discussed below.
Industrial end market remained the largest revenue contributor, accounting for approximately 28%. The segment’s revenues were down sequentially but up year over year. The increase was driven primarily by factory automation products.
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Consumer, Maxim’s second-largest segment, also generated 28% of the revenues, up sequentially and driven by growth across all major product segments.
The Communications and Data Center end market accounted for 20% of the revenues, down both sequentially as well as from the year-ago quarter. The strong growth of 100G optical products used in high-speed data center applications was offset by broad based softness in communications infrastructure.
The Automotive end market also generated 20% of revenues, flat sequentially but up year over year. The increase was driven by growth in infotainment content. Power management products for infotainment applications helped in strengthening customer relationships in automotive and earning new design wins.
The Computing business contributed the remaining 4%.
Margins
Non-GAAP gross margin was 66.9%, up 30 basis points (bps) sequentially and 290 bps year over year. The increase was due to higher revenues, a favorable mix and strong operational execution.
Non-GAAP operating expenses of $182.3 million decreased 0.7% year over year. The decrese was due to higher employee profit sharing. As a percentage of sales, research and development expenses decreased, while selling, general and administrative expenses increased.
Operating margin was 35.2%, up 390 bps year over year. The improvement was driven by revenue growth and manufacturing transformation.
Net Income
GAAP net income was $154.5 million compared with $137.6 million a year ago.
Pro forma net income was $170.6 million compared with $138.2 million a year ago. Our pro forma calculation excludes restructuring, intangibles amortization, asset impairments and other one-time charges on a tax-adjusted basis.
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Balance Sheet & Cash Flow
During the reported quarter, cash flow from operations was $220 million compared with $237 million in the earlier quarter. Important usages of cash in the quarter included $14 million on capex, $75 million for share repurchases and $101 million paid as dividends.
Total cash, cash equivalents and short-term investments were $2.77 billion in the fiscal first quarter, up from $2.74 billion in the earlier quarter.
Q2 Guidance
For the fiscal second quarter, Maxim expects revenues in the range of $600-$640 million based on a quarter-end backlog of $426 million. The Zacks Consensus Estimate is pegged at $581.2 million.
Gross margin is expected in the range of 66-68% on an adjusted basis (excluding special items). Earnings per share are expected in the range of 61-67 cents on an adjusted basis. The Zacks Consensus Estimate stands at 56 cents.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the last month as none of them issued any earnings estimate revisions.
VGM Scores
Currently, Maxim's stock has a nice Growth Score of B, a grade with the same score on the momentum front. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
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Our style scores indicate that the stock is equally suitable for growth and momentum investors.
Outlook
Notably, the stock has a Zacks Rank #3 (Hold). We expect in-line returns from the stock in the next few months.
Maxim Integrated Products, Inc. (MXIM): Free Stock Analysis ReportOriginal post