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Alberto Abaterusso
Alberto Abaterusso
Articles (1179) 

Broadcom Soars on 4th Quarter Numbers

The semiconductors company beat expectations on earnings and sales

December 07, 2017 | About:

Broadcom Ltd. (AVAGO) topped consensus estimates in it fourth quarter results, and the stock jumped 4.46% in after hours trading Wednesday.

Broadcom beat expectations on fourth quarter 2017 non-GAAP measure of earnings from continuing operations by 8 cents per diluted share, having reported an EPS of $4.59 (or $2.09 billion). This is a 32.3% increase year over year.

When net profit and EPS are considered as GAAP measures, the company closed the quarter reporting a turnaround to a positive bottom line of $636 million (or diluted EPS of $1.50) from a loss of $632 million (or a per-share loss of $1.59) reported in the comparable quarter of 2016.

Nearly 95% of GAAP net profit refers to Broadcom’s common shares and approximately 5% is attributable to non-controlling interests.

Total revenue for the quarter came in at $4.84 billion, a 16.6% increase year over year. Broadcom beat expectations on quarterly revenue by $2 million.

The following two charts show the trend in Broadcom’s revenue over the last six quarters (chart A) and the last six years (chart B):

Chart A.

Chart B.

The wired infrastructure segment's revenue, which usually accounts for 50% of the company’s total revenue, came in at $2.15 billion, a 3% increase year over year. The wireless communications segment contributed $1.796 billion, a 33% increase; enterprise storage contributed $645 million, up 15%; and industrial and other contributed $257 million, a 66% increase.

Operating income was $865 million, up 127% from an income of $381 million produced by Broadcom’s operations last year. The gross margin for the quarter -- calculated as total sales revenue minus cost of goods sold -- was $2.38 billion. Operating income and gross margin were 17.9% and 49.2% of net revenue.

The company closed the quarter with $11.2 billion in cash on hand and securities, which is a 113.3% increase from the previous quarter. Cash from operations came to $1.96 billion, from long-term debt issuance of $3.98 billion and from the sale of real property. The latter was priced at $440 million.

CEO Hock Tan announced the increase in the quarterly dividend and the acquisition of Brocade Fibre Channel Storage Area Networking business: “On the heels of very strong fiscal 2017 financial results, and continuing momentum into the new fiscal year, we are increasing capital returns to our shareholders and have raised our interim quarterly dividend by 72%. We also closed the acquisition of Brocade early in the first fiscal quarter of 2018, adding to our very successful track record of highly accretive M&A.”

The company provided revenue guidance between $5.221 billion and $5.371 billion for the first quarter of fiscal 2018, while analysts expect average revenue of $4.83 billion.

The company expects the gross margin will be around 47.75% and that operating expenses will be approximately $1.760 billion.

Disclosure: I have no positions in Broadcom Ltd.

About the author:

Alberto Abaterusso
If somebody asks what being a Value Investor means, Alberto Abaterusso would answer: “the Value Investor is not the possessor of a security that represents the company, but he is the owner of that company. As an owner of the company the Value Investor is actively involved in the dynamics of that company and his first aim is how to have sales progressively growing.”

Alberto Abaterusso would add: “probably the Value Investor is one of the least patient persons in the world concerning sales.”

Alberto Abaterusso is a freelance writer based in The Netherlands. He primarily writes about gold, silver and precious metals mining stocks. His articles have also been widely linked by popular sites, including MarketWatch, Financial Times, 24hGold, Investopedia, Financial.org, CNBS, MSN Money, Zachs, Reuters and others. Alberto holds an MBA from Università degli Studi di Bari (Italy), Aldo Moro.

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