Cirrus Logic (CRUS, Financial) is a fabless semiconductor company. The company develops analog and mixed-signal integrated circuits, or ICs, for a diverse range of consumer and industrial markets. Its audio products are used in diverse range of consumer devices like portable media players, smartphones, tablets, laptops, audio/video receivers, portable media players and speakers, home theater systems, set-top boxes, headsets and headphones, and digital camcorders and televisions.
The semiconductor company declared its fourth-quarter 2015 and full year results last month and continued its streak of solid performance. Let’s take a look.
Strong results
On the back of stronger-than-expected demand for portable audio products, the semiconductor manufacturer posted fourth-quarter 2015 revenues of $215 million, representing year-over-year growth of over 70% and beating consensus estimates by a handsome $22.99 million. For the full year, Cirrus is excited to have achieved long-term targets of 15% organic revenue growth and 20% non-GAAP operating profit on revenue of $916.6 million.
On the back of better-than-expected top-line growth, the earnings came in at $0.66 per share, beating consensus estimates by $0.19 per share.
Looking ahead
Cirrus had completed acquisition of Wolfson toward the back half of last year, thus strengthening its position in the audio ICs and software for portable applications. This acquisition added a layer to its growth story as it started cross selling amplifiers with the smart codecs derived from the Wolfson acquisition. This is a good growth opportunity in the long run also.
Another growth opportunity is the porting solutions developed for high-end smartphone market down into the mid-tier of devices which is obviously a much higher volume segment compared to flagship models of phones. According to Gartner, the growth is expected to come from mid-tier smartphones in mature markets and low-end Android smartphones in emerging markets, like India.
The prospects and market opportunity in the mid-tier segment is evident in HTC’s analyst-beating results ever since it started focusing on the mid-tier segment. A Thomson Reuters poll of analysts forecasts a much stronger second quarter, going forward.
Also, a bigger long-term market opportunity exists when Cirrus starts taking the technology that it is perfecting for mobile phones to other form factors such as automotive, smart home, wearables, and smart mobile accessories.
In addition, Cirrus transitioned to 55-nanometer. The company is ramping up the new custom and general market products that target low power audio and voice applications.
The company expects the first-quarter 2016 revenue to be in the range of $260M-$280 million versus $152.6 million in the year ago-quarter. This is far ahead of consensus estimates of $222.2 million. For fiscal 2016 the fables semiconductor manufacturer expects earnings to be in the range of $2.15 to $2.35 per share, and for fiscal 2017 the same is expected to be in the range of $2.28 to $2.45 per share.
Analysts are optimistic
Cirrus is seeing lot of activity on the earnings revision. Consensus estimates have moved up for the first-quarter 2016 as well as fiscal 2016 over the past few weeks, suggesting that Cirrus Logic could be a good choice for investors.
Wrapping up
Cirrus has been delivering estimate-beating performance. The guidance is also revised upwards and analysts are upbeat about the growth prospects of the company. The mid-tier smartphone market is huge and presents another growth opportunity for the company. With a trailing P/E of well over 50 and forward P/E of 14.15, the growth story looks intact. In fact, for the next five years the growth is pegged at a CAGR of over 10%. Hence, this is a good stock to add to portfolio for long-term gains.
