Advanced Micro Beats on Q1 Earnings - Analyst Blog
April 21 2014 - 10:00AM
Zacks
Advanced Micro
Devices (AMD) reported earnings of 2 cents per share in
the first quarter of 2014, exceeding the Zacks Consensus Estimate
by a couple of cents.
Revenues
AMD generated revenues of $1.40
billion in the quarter, down 8.8% sequentially but up 28.4% year
over year. However, first-quarter revenues were better than the
Zacks Consensus Estimate of $1.34 billion and management’s
expectations of 16.0% (+/- 3.0%) revenue decline driven by healthy
demand for Radeon GPUs and semi-custom gaming APUs.
Revenues by
Segment:
Computing
Solutions comprised 48% of AMD’s sales in the last
quarter, down 8.2% sequentially and 11.7% from the year-ago
quarter. The decline was due to decreased desktop and client unit
shipments, partially offset by increased notebook revenues.
AMD’s Graphics
and Visual Solutions business generated the
remaining 52% of the sales, down 15.1% sequentially and soared
117.8% from the year-ago quarter. The year-over-year increase was
largely driven by semi-custom SoCs. Management stated that GPU
revenues increased sequentially as well as year over year due to
strong demand for R7 and R9 series of GPUs.
Operating
Results
Reported gross margin for the
quarter was 34.9%, up 10 basis points (bps) sequentially but down
600 bps from the year-ago quarter. The first-quarter gross margin
included a $4 million benefit from sales of certain previously
reserved products.
Operating expenses of $438.0
million decreased 19.3% from $543.0 in the year-ago quarter. Also,
as a percentage of sales, both research and development (R&D)
and marketing, general and administrative expenses declined. As a
result, reported operating margin of 3.5% compared favorably with
the year-ago quarter’s margin of (9.0%).
The quarter’s GAAP net loss was
$20.0 million or loss of 3 cents per share compared with a net loss
of $146.0 million or 19 cents per share reported in the comparable
quarter last year. Excluding legal charges and intangible
amortization charges but including stock-based compensation
expenses, non-GAAP net earnings were $12.0 million or 2 cents per
share versus a net loss of $94 million or loss of 13 cents in the
year-ago quarter.
Balance Sheet
AMD exited the first quarter with
cash, cash equivalents and marketable securities of approximately
$9.02 billion versus $1.10 billion in the prior quarter. Trade
receivables were $840.0 million, up from $832.0 million in the
prior quarter.
Total debt (short- and long-term)
in the quarter was $2.14 billion, up from $2.06 billion in the
previous quarter. Additionally, the company paid $200 million cash
to GlobalFoundries related to the reduction of the "take or pay"
wafer obligation commitments for 2012.
During the quarter, AMD used $204.0
million from cash for operations, spending $21.0 million on capital
expenditures. Free cash flow was negative $225.0 million in the
last quarter.
Guidance
Management expects second-quarter
2014 revenues to increase 3.0% (+/- 3.0%) sequentially. Non-GAAP
gross margin is expected to be 35.0%. Operating expenses are
expected to be approximately $435.0 million.
For full-year 2014, management
expects revenues to increase year over year, non-GAAP operating
expenses in the range of approximately $420.0–$450.0 million per
quarter, taxes of approximately $3.0 million per quarter and
capital expenditures of approximately $120.0 million.
Our Take
AMD’s top line for the quarter
surpassed its guidance, supported by new products and increased
demand for new semi-custom SoCs. A more conducive
market, increased game console wins, adoption of new products,
position in graphics and good execution are expected to pull the
company out of the weak PC market.
We believe AMD is on the right
track. Last quarter, the company witnessed strong demand for
AMD-powered Microsoft and Sony gaming consoles. It is trying to
position itself strongly in the gaming market, which has enough
potential to grow over the next few quarters.
Also, during the quarter, the
company made good progress in embedded markets, including
communication, industrial and gaming, among others. It expects to
further increase revenue contribution from the embedded business
and increase market share. AMD’s new APUs, which power a number of
thin and light-touch notebooks are expected to drive strong
double-digit sequential increase in mobile processor unit
shipments.
Currently, AMD sports a Zacks Rank
#1 (Strong Buy). Other stocks that have been performing well and
are worth a look include Freescale Semiconductor
(FSL), Rambus Inc. (RMBS) and Intel
Corp. (INTC). While Freescale Semiconductor and Rambus
have the same Zacks Rank as AMD, Intel has a Zacks Rank #2
(Buy).
ADV MICRO DEV (AMD): Free Stock Analysis Report
FREESCALE SEMI (FSL): Free Stock Analysis Report
INTEL CORP (INTC): Free Stock Analysis Report
RAMBUS INC (RMBS): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
Intel (NASDAQ:INTC)
Historical Stock Chart
From Feb 2024 to Mar 2024
Intel (NASDAQ:INTC)
Historical Stock Chart
From Mar 2023 to Mar 2024