Xilinx Misses on Q4 Earnings; Beats Revs - Analyst Blog

Xilinx Inc. XLNX reported adjusted earnings per share of 53 cents in the fourth quarter of fiscal 2014, which lagged the Zacks Consensus Estimate of 55 cents per share. Reported earnings increased 12.0% from the year-ago quarter.

Shares fell 4.62% in after-hours trade as the company provided a tepid guidance for the June quarter.

Quarter Details

Xilinx's revenues of $617.8 million were up 16.1% on a year-over-year basis but beat the Zacks Consensus Estimate of $611.0 million. The year-over-year increase was due to 30% improvement in revenues from Communications & Data Center segment (49% of fourth-quarter fiscal 2014 revenues) primarily due to China LTE deployments.  

The company also witnessed a 7% year-over-year growth in revenues from Industrial, Aerospace & Defense segment (34% of fourth-quarter revenues). Moreover, revenues from Broadcast, Consumer & Automotive (15% of fourth-quarter revenues), and Other sources (2% of fourth-quarter revenues) increased 2% year over year.

Xilinx reported strong sales from its 28-nanometer (nm) which increased 40% sequentially. The company witnessed strong sales of its Virtex, Artix, Zynq and Kintex products as well.  

Geographically, revenues from North America remained flat while Asia Pacific and Japan increased 48% and 16% year over year, respectively. However, revenues from Europe were down 6% on a year-over-year basis.

Xilinx reported 157 basis points (bps) gross margin expansion on a year-over-year basis to 67.6%, primarily attributable to higher revenues and favorable customer mix.

Adjusted operating expenses (excluding amortization) for the quarter increased 11.9% to $225.9 million but as a percentage of revenues, operating expenses were down 137 bps on a year-over-year basis. This positively impacted Xilinx's operating margins which increased 294 bps on a year-over-year basis.

Adjusted net income for the quarter came in at $158.5 million or 53 cents compared to $133.1 million or 48 cents reported in the year-ago quarter. Excluding debt redemption loss of 3 cents, the company's earnings came in at 56 cents per share.

Xilinx ended the quarter with cash, equivalents and short-term investments remained flat sequentially at $2.46 billion. During the quarter, Xilinx generated $189.0 million of cash from operations and incurred $14 million in capital expenditure. The company paid $67.0 million in cash dividends and repurchased shares worth $73.9 million.

Guidance

Management expects the communications segment to continue to show strength due to the China LTE scenario. Xilinx expects revenues from the industrial and aerospace to be flat sequentially while revenues to decrease due to a decline in aerospace and defense.

Buoyed by the growth from AVB and automotive, Xilinx expects its broadcast, consumer and automotive revenues to increase sequentially.

Keeping these factors in consideration, management expects a 0% to 4% sequential ($617.8–$642.5 million) increase in total revenue for the June quarter. The Zacks Consensus Estimate is pegged at $638 million, higher than the mid-point of the forecasted range.

Gross margin is forecast to be roughly 68%, flat sequentially. Operating expenses are expected to be around $220.0 million, including approximately $2.5 million of amortization of acquisition-related intangibles. Share count is expected to be approximately 286 million. Effective tax rate is expected to be about 13% to 14%.

Conclusion

Xilinx reported mixed fourth-quarter results. The first-quarter revenue guidance was tepid. Nonetheless, the growing demand for 28-nm nodes driven by higher wireless deployments and strength in the wired communication segment are expected to remain the growth drivers. The company's product launches are also expected to boost revenues.

However, stiff competition from Altera Corp. ALTR and dwindling PC (significant consumer for semiconductor chips) market sales keep us concerned for the near term.

Currently, Xilinx has a Zacks Rank #2 (Buy). Investors may also consider stocks, such as Accenture ACN and Micron MU with the same Zacks Rank as Xilinx.