Maxim's (MXIM) Q4 Earnings In Line, Revenues Lag Estimates

Maxim Integrated Products, Inc. Price, Consensus and EPS Surprise

Maxim Integrated Products, Inc. price-consensus-eps-surprise-chart | Maxim Integrated Products, Inc. Quote

Operating Details

Non-GAAP gross margin was 64.8%, contracting 320 bps from the year-ago quarter.

Non-GAAP operating expenses of $180.3 million decreased 7.4% year over year. However, as a percentage of revenues, the figure expanded 170 bps from the prior-year quarter.

Non-GAAP Operating margin came in 32%, down from 35.1% in the year-ago quarter.

Balance Sheet & Cash Flow

As of Jun 29, 2019, cash, cash equivalents and short-term investments were $1.89 billion, which almost remained flat from the previous quarter.

During the quarter under review, cash flow from operations was $237.47 million, improving from $206.94 million in the previous quarter. The company utilized $31 million for capital expenditure during the fiscal fourth quarter.

Further, trailing 12-month free cash flow was $793 million, down from $899 million in the fiscal third quarter.

Further, Maxim spent $102 million in repurchasing shares and made $125 million of dividend payment (46 cents per share).

Guidance

For fiscal first-quarter 2020, earnings per share are expected in the range of 46-52 cents on an adjusted basis. The Zacks Consensus Estimate is pegged at 53 cents.

Further, Maxim expects revenues in the range of $510 million to $550 million.

Non-GAAP gross margin is expected within the range of 63-65%.

Management expects the fiscal first quarter to be soft for industrial market. This market is likely to witness seasonality, which will act as an overhang.

Further, in automotive market, sluggish auto production is expected to be a major concern. Additionally, market headwinds in China, on account of weak consumer demand for auto, are likely to affect the shipment of the company’s battery management systems in the September quarter. Nevertheless, Maxim anticipates revenues from this product line to surge year over year.

Furthermore, smartphone market weakness remains a headwind for consumer market. Revenues from Samsung (KS:005930) are anticipated to be down 50% year over year owing to lower content and unit shipments. However, Maxim remains optimistic about its gaming, peripherals, wearables and tablet business.

In communications and data center market, Maxim expects suspension of shipments to Huawei and weak building block products to be a major headwind. These are likely to offset the positive effects of strengthening demand for 100G laser drivers and modules.

Zacks Rank & Key Picks

Maxim currently has a Zacks Rank #4 (Sell).

Some better-ranked stocks in the broader technology sector are Rosetta Stone (NYSE:RST) , NetEase (NASDAQ:NTES) and CACI International (NYSE:CACI) . While Rosetta Stone sports a Zacks Rank #1 (Strong Buy), NetEase and CACI carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Rosetta Stone, NetEase and CACI is currently projected to be 12.5%, 14.85% and 10%, respectively.

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