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Alberto Abaterusso
Alberto Abaterusso
Articles (1711) 

Broadcom Falls After Posting 2nd-Quarter Results

The semiconductor beats forecasters on earnings

June 14, 2019 | About:

Shares of Broadcom Inc. (AVGO) plunged 8.56% to $257.51 in after-hours trading on Thursday after beating consensus estimates on non-GAAP earnings by 3 cents per diluted share for the second quarter of fiscal 2019. The San Jose, California-based semiconductor company recorded non-GAAP earnings of $5.21 per diluted share, reflecting a 6.8% increase from the prior-year quarter.

GAAP earnings declined 80.3% year-over-year to $1.64 per diluted share, but they topped expectations by 7 cents.

Revenue increased 10% to $5.52 billion, but it fell $180 million short of projections.

The semiconductor solutions segment contributed 74.1% or $4.09 billion in revenue, the infrastructure software segment 25.6% or $1.41 billion and the intellectual property licensing segment 0.3% or $16 million. The semiconductor solutions segment decreased 10%, infrastructure software soared 216% and intellectual property fell 47%.

“We executed according to plan in the second quarter with tailwinds from networking offsetting the anticipated headwinds from wireless,” President and CEO Hock Tan said. “We currently see a broad-based slowdown in the demand environment, which we believe is driven by continued geopolitical uncertainties, as well as the effects of export restrictions on one of our largest customers. As a result, our customers are actively reducing their inventory levels, and we are taking a conservative stance for the rest of the year.”

Broadcom also recorded a 540 basis-point increase in the non-GAAP gross margin to 72% and a 4% jump in the non-GAAP net income to $2.33 billion. The operating cash flow grew 15.3% to $2.67 billion in the second quarter of fiscal 2019 from $2.31 billion in the second quarter of fiscal 2018. During the quarter the company allocated approximately $1.33 billion for the repurchase of shares of its own common stock.

The balance sheet had $5.33 billion in cash on hand and cash equivalents, and $37.55 billion in debt as of May 5.

For full fiscal year 2019, Broadcom guided for net revenue of $22.5 billion versus consensus estimates of $24.41 billion, and a non-GAAP operating margin of 52.5%. The company also anticipates that it will use $500 million as capital expenditures.

Additionally, on July 2, Broadcom will pay a $2.65 cash quarterly dividend per common share to its shareholders of record June 24. The ex-dividend date is scheduled for June 21. Based on the share price of $281.61 at close on Thursday, it has a forward dividend yield of 3.79% versus the industry median of 2.03%.

The stock has a market capitalization of about $111.47 billion. The share price at close on Thursday is clearly above the 200-day simple moving average line and below the 100- and 50-day SMA lines. The 52-week range is $197.46 to $323.20.

Disclosure: I have no position in any securities mentioned.

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About the author:

Alberto Abaterusso
If somebody asks what being a value investor means, Alberto Abaterusso would answer, “The value investor is not just the possessor of the 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 concern is how to have sales progressively growing. Also, the value investor is probably one of the most demanding persons in the world concerning sales.”

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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