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  • James Covello of Goldman Sachs discussed four semiconductor companies that issued "disappointing" reports.

  • The companies include: Altera Corporation (NASDAQ: ALTR), Freescale Semiconductor Ltd (NYSE: FSL), MKS Instruments, Inc. (NASDAQ: MKSI), and Maxim Integrated Products Inc. (NASDAQ: MXIM).
  • All four names issued either an earnings result that fell short of expectations, poor guidance, or a combination of both.
  • James Covello of Goldman Sachs discussed four semiconductor companies that issued a "disappointing" earnings result.

    Maxim Integrated: Sales Guidance Implies 9% Decline

    Maxim Integrated expects its second quarter (ending in December) revenue to be in a range of $490 million to $520 million, implying a decline of eight to 13 percent quarter over quarter and short of the $553 million the Street was looking for. Management also guided its second quarter earnings per share to be $0.29 to $0.35 – short of the Street's and the analyst's $0.42 per share estimate.

    However, the company stated that its third quarter revenue (ending in March) could be flattish year over year, implying a 14 percent quarter over quarter gain driven by consumer and auto. The analyst stated that Maxim is "executing well" on auto share gains and cost controls. However, its large exposure (approximately 15 percent) to its client Samsung should continue to be an "overhang" in 2016.

    MKS Instruments: Guidance Points To ‘Significant' Q4 Miss

    MKS Instruments guided its fourth quarter sales to be $150 million to $170 million, marking a 19 percent to 28 percent quarter over quarter decline and also falls short of the Street's $210 million estimate. The company also guided its earnings per share to be $0.21 to $0.33 – "well below" the Street's estimate of $0.57. Management attributed the shortfall to an inventory correction at OEMs which is a "function of weaker capex forecasts at end customers."

    According to Covello, prior similar corrections lasted two to four quarters and revenue should begin showing signs of stabilization in the first quarter of next year and "begin growing strongly" the following quarter.

    Altera: Key Takeaways From Q3

    Altera's third quarter sales fell short of what analysts were expecting by three percent, with an 11 percent quarter over quarter increase in comms and networking/storage which was offset by a 14 percent dip in industrial, military and auto.

    Altera's gross margins were also lower than expected, likely due to the unfavorable mix.

    Freescale Semiconductors: Decline In RF A Driver

    Freescale Semiconductors third quarter revenue fell one percent short of what analysts were expecting but the company earned five cents more than expected. However, management guided its fourth quarter sales to be 14 percent below the Street's estimate due to a weakness in auto, enterprise, industrial, and wireless comms.

    Covello suggested that a decline in RF was a large driver of the shortfall.

    Latest Ratings for ALTR

    Jan 2018BerenbergInitiates Coverage OnBuy
    Nov 2017William BlairInitiates Coverage OnOutperform
    Nov 2017RBC CapitalInitiates Coverage OnSector Perform

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