CHICAGO, Aug. 23, 2011 /PRNewswire/ -- Zacks.com announces
the list of stocks featured in the Analyst Blog. Every day the
Zacks Equity Research analysts discuss the latest news and events
impacting stocks and the financial markets. Stocks recently
featured in the blog include: Marvell Inc. (Nasdaq: MRVL),
Intel Corp. (Nasdaq: INTC) Texas Instruments Inc.
(NYSE: TXN) LSI Corp. (NYSE: LSI) and Lowe's
Companies Inc. (NYSE: LOW).
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Here are highlights from Monday's Analyst Blog:
Marvell Beats, Outlook Bright
Marvell Inc. (Nasdaq: MRVL) has reported second quarter
fiscal 2012 adjusted earnings per share (EPS) of 33 cents, beating the Zacks Consensus Estimate by
a penny. Last Friday, the shares witnessed a 10.69% increase in
after-market trade on encouraging third quarter guidance.
Revenue
Marvell reported revenues of $897.5
million in the second quarter, up 0.1% from the prior-year
quarter and 12.0% from the prior quarter. Revenue came within the
company's guided range of $870.0–$910.0 million. The quarter's improvement
was largely attributed to broad-based strength in the mobile
computing market, which boosted chip demand. The market seems to be
in a recovery mode after suffering supply chain disruptions caused
by the Japan earthquake. New
product launches also provided some support.
Revenues from the mobile and wireless end market grew 18.0% from
the prior quarter. The sequential improvement reflects the adoption
of new products such as TD in China, and seasonal growth from wireless
connectivity solutions.
Revenues from the storage end market increased 13.0% from the
prior quarter, mainly on share gains at Hitachi Mobile Drive, which
is now in demand, as well as strong seasonal demand.
Marvell witnessed a 3.0% sequential gain in its revenues from
the networking end market. The sequential growth came on the back
of share gains and new product growth at existing and new
enterprise and home networking customers.
Operating Results
In the second quarter, gross margin on a GAAP basis declined 120
basis points (bps) year over year to 57.9%. Gross margin declined
as a result of higher commodity costs and foundry prices. Operating
margin on a GAAP basis decreased 260 bps year over year to 21.7%.
Total operating expenses were $324.8
million, up 4.2% from $311.7
million in the earlier-year quarter. Higher operating
expenses reflect continued investments in relation to product
launches.
GAAP net income in the quarter was $192.4
million, or 31 cents per
share, compared to $219.8 million, or
33 cents in the year-ago period.
Excluding amortization and restructuring but including stock-based
compensation expenses, net income on non-GAAP basis was
$204.1 million, or 33 cents per share, compared to $242.7 million, or 37
cents in the year-earlier period.
Balance Sheet & Cash Flow
Marvell ended the quarter with cash, equivalents and short-term
investments of $2.4 billion, up from
$2.3 billion in the prior quarter.
Accounts receivables were $405.8
million, compared to $425.5
million in the prior quarter. Inventories increased to
$322.0 million from $299.1 million in the preceding quarter. The
company carries no long-term debt.
Cash from operating activities was $263.4
million in the second quarter, compared to $177.1 million in the prior quarter. Capital
expenditure was $25.2 million. Free
cash flow was $235.0 million,
compared to $157.0 million in the
prior quarter.
During the quarter, Marvell Tech bought back 9 million shares
for a total value of $135.7
million.
Third Quarter Outlook
Marvell Tech expects third quarter revenues in the range of
$940.0 million to $980.0 million.
Revenue from the mobile and wireless end market is expected to
grow in double digits sequentially, driven by growth at existing
mobile customers, the growth in TD chips and seasonal increases in
wireless connectivity. In the networking end market, revenues are
projected to increase sequentially in high single digits from new
design wins at existing and new customers. For the storage end
market, Marvell expects revenues to remain flat sequentially.
Non-GAAP gross margin is projected in the range of 56.5% to
57.5%. The company anticipates non-GAAP operating expenses of
roughly $295.0 million (+/-
$5 million). Research and development
(R&D) expenses are estimated at approximately $235.0 million and selling, general and
administrative expenses at approximately $60.0 million. Marvell expects operating margin
of approximately 26% (+/- 1.0%). Net interest expense and other
income are expected to be approximately a $2
million benefit.
The diluted share count is projected at 620 million. Considering
all the above, non-GAAP EPS is estimated at 41 cents. GAAP EPS is expected to be lower than
the non-GAAP estimate by about 7
cents (+/- $0.01). The Zacks
Consensus Estimate for the third quarter is 37 cents.
Overall, management remains optimistic about its investment in
TD-SCDMA and SSD and expects it to improve results throughout the
year. Management also commented that it will remain focused toward
investments on initiatives designed to increase revenue and profit
through both new products and share gains.
Our Take
The quarter's results were decent with the bottom line
surpassing the Zacks Consensus Estimate. But the third quarter
guidance reflects an improving demand situation and product
adoption. Marvell's endeavour to expand its chip sales in
China through the establishment of
an R&D centre there is encouraging.
However, we remain concerned about stiff competition in the
semiconductor market from major players, such as Intel Corp.
(Nasdaq: INTC), Texas Instruments Inc. (NYSE: TXN) and
LSI Corp. (NYSE: LSI). We are also concerned about
the significant number of pending lawsuits, higher material costs
and the company's European exposure.
Currently, Marvell Technology has a Zacks #5 Rank, implying a
short-term Strong Sell recommendation.
Earnings Scorecard: Lowe's
Lowe's Companies Inc. (NYSE: LOW) recently posted soft
second-quarter 2011 results and trimmed its fiscal 2011
projection.
Analysts had over a week to ponder on the company's results. In
the paragraphs that follow, we cover the recent earnings
announcement, subsequent estimate revisions by analysts, as well as
the Zacks Rank and long-term recommendation for the stock.
Earnings Report Review
Lowe's quarterly earnings of 68
cents per share came a penny ahead of the Zacks Consensus
Estimate and jumped 17.2% from 58
cents in the prior-year quarter. However, on a reported
basis including one-time items, the quarterly earnings came in at
64 cents a share.
Net sales for the quarter nudged up 1.3% to $14,543 million from $14,361 million last year. However, net sales
fell short of the Zacks Consensus Estimate of $14,732 million. The company had earlier
projected sales to increase 4% during the quarter.
Comparable-store sales during the quarter fell 0.3% short of
management's guidance for approximately 2% growth.
Management Guided
Lowe's now expects third quarter earnings between 30 cents and 33 cents per share. However,
management trimmed its fiscal 2011 earnings outlook to between
$1.48 and $1.54 per share, compared
with the $1.56 to $1.64 forecasted
earlier. This revision was the result of soft sales results and
sluggish economic recovery.
(Read our full coverage on this earnings report: Lowe's a Penny
Ahead)
Agreement of Estimate Revisions
Clearly, a negative sentiment is palpable among analysts, who
remain skeptical about Lowe's performance. Following the earnings
release, the Zacks Consensus Estimates has been falling with
analysts remaining bearish on the stock.
In the last 7 days, fifteen out of 23 analysts covering the
stock lowered their estimates, whereas only 2 analysts raised for
the third-quarter 2011. For the fourth quarter, fourteen analysts
pulled back and 2 increased their estimates.
For fiscal 2011, twelve analysts moved their estimates downward,
whereas 5 analysts moved upward. For fiscal 2012, fourteen analysts
lowered their estimates and only 1 analyst raised in the last 7
days.
Magnitude of Estimate Revisions
For the third and the fourth quarters of 2011, the Zacks
Consensus Estimate moved down by 2 cents to
33 cents and 24 cents,
respectively, in the last 7 days.
For fiscal 2011, the Zacks Consensus Estimate dropped
3 cents to $1.59, and for fiscal 2012 it fell 7 cents to $1.79 in
the last 7 days.
Lowe's in Neutral
Being the world's second largest home improvement retailer,
Lowe's boasts of a proven strategy of investing in stores to
enhance customer-shopping experience by improving point-of-sale and
directional signage, and adding more product selection. The
company's sustained focus on the Everyday Low Prices, New Lower
Price, Go Local and Specialty Sales initiatives have helped it to
grow its market share.
Lowe's is actively managing its capital. The company is
rationalizing its capital expenditures, including
store-remerchandising efforts, to improve its return on investment.
As a result, the company expects to generate substantial future
cash flows. We appreciate the company's rational approach of
cutting new store growth targets, given the sluggish consumer
environment and the trends in the housing market.
Heavy job losses and reduced access to credit have led to a
sharp drop in consumer discretionary spending on big-ticket items.
Although the economy is showing signs of revival, we believe that
spending on big remodeling projects will likely remain under
pressure until the housing market stabilizes and consumer spending
rebounds.
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