Broadcom Corp Earnings Cheat Sheet: Margins Suffer as Costs Rise, Profit Falls

S&P 500 (NYSE:SPY) component Broadcom Corporation (NASDAQ:BRCM) posted lower net income in the third quarter compared with a year-earlier period. Broadcom manufactures semiconductors for wired and wireless communications.

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Broadcom Earnings Cheat Sheet for the Third Quarter

Results: Net income for Broadcom Corporation fell to $270 million (48 cents per share) vs. $327.1 million (60 cents per share) a year earlier. This is a decline of 17.5% from the year earlier quarter.

Revenue: Rose 8.4% to $1.96 billion from the year earlier quarter.

Actual vs. Wall St. Expectations: BRCM reported adjusted net income of 82 cents per share. By that measure, the company beat the mean estimate of 53 cents per share. Analysts were expecting revenue of $1.95 billion.

Quoting Management: “Broadcom delivered record revenue and cash flow in Q3 with strength across all of our end markets – Home, Hand and Infrastructure,” said Scott McGregor, Broadcom’s President and CEO. “While our outlook reflects potential industry softness, our long-term strategy is to continue to outgrow the overall semiconductor market with product innovations that drive new market growth and value.”

Key Stats:

Gross margin shrank 0.8 percentage point to 50.9%. The contraction appeared to be driven by increased costs, which rose 10.1% from the year earlier quarter while revenue rose 8.4%.

Revenue has risen the past four quarters. Revenue increased 11.9% to $1.8 billion in the second quarter. The figure rose 24.2% in the first quarter from the year earlier and climbed 44.9% in the fourth quarter of the last fiscal year from the year-ago quarter.

The company has now seen net income fall in each of the last two quarters. In the second quarter, net income fell 37.1% from the year earlier quarter.

The company has now topped analyst estimates for the last three quarters. It beat the mark by 10 cents in the second quarter and by 5 cents in the first quarter.

Looking Forward: Analysts appear increasingly optimistic about the company’s results for the next quarter. The average estimate for the fourth quarter has moved up from 54 cents a share to 56 cents over the last ninety days. The average estimate for the fiscal year is $1.80 per share, down from $1.82 ninety days ago.

Competitors to Watch: QUALCOMM, Inc. (NASDAQ:QCOM), Texas Instruments Inc. (NYSE:TXN), Analog Devices, Inc. (NYSE:ADI), NVIDIA Corporation (NASDAQ:NVDA), Marvell Tech. Group Ltd. (NASDAQ:MRVL), Intel Corporation (NASDAQ:INTC), Entropic Communications, Inc. (NASDAQ:ENTR), PMC-Sierra, Inc. (NASDAQ:PMCS), Infineon Tech. AG (IFNNY), and Zoran Corporation (NASDAQ:ZRAN).

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(Source: Xignite Financials)