IFNNY's Earnings Miss in 2Q - Analyst Blog
May 07 2013 - 4:56AM
Zacks
Infineon Technologies AG (IFNNY) reported
second quarter fiscal 2013 results with earnings of €0.03 (4 cents
per ADR), which was 40% or 2 cents below the Zacks Consensus
Estimate. Quarterly earnings also declined 70% year over year.
Profits were primarily impacted by global uncertainties.
Revenue
Infineon’s revenues in the quarter were €918 million ($1.21
billion), down 7% year over year but up 8% sequentially. The
sequential increase was driven in part by the consequence of a
return to more normalized revenue levels in the automotive
segment.
Revenue by Segments
Automotive segmentrevenue improved 12% to €424
million ($560 million) in the second quarter of 2013 from €377
million in the previous quarter. After definite inventory
reductions within the supply chain in the last quarter, demand
returned to more normal levels in the second quarter. However, the
positive earnings impact from higher revenue was partially offset
by regular annual price reductions and higher research and
development expenses.
In the reported quarter, sales in the Industrial Power
Control segment revenues increased 4% from €138 million to
€144 million ($190 million), reflecting the growth in demand for
industrial drives and major home appliances which was partially
offset by demand in renewable energy.
Power Management and Multimarketsegment revenue
reported a 2% increase from €222 million in the first quarter to
€227 million ($299 million) in the second quarter. The normal
seasonal decrease and the general weakness in the PC market were
more than offset by strong business with products used in lighting,
servers, tablets and smartphones. Revenues generated with
distributors also picked up during the quarter.
Revenue in the Chip Card and Security totaled
€108 million ($143 million), which was flat sequentially. Revenues
in Payment and in Government ID business improved, while revenues
generated with SIM cards declined due to seasonal factors.
Total segment operating income (Infineon defines segment result
as operating income) was €68 million ($89.8 million), an increase
of 55% from €44 million in the prior quarter. However, operating
income declined 53% from €144 million in the prior-year quarter.
Total Segment operating margin in the reported quarter increased to
7.4% from 5.2% in the comparable prior-year quarter. Margin
increase was primarily driven by higher revenue and continued cost
control, which was partially offset by price reductions in volume
purchase agreements.
Balance Sheet and Cash Flow
Income from continuing operations in the second quarter was €36
million ($48 million), compared with €26 million recorded in the
previous quarter. Free cash flow from continuing operations grew
from negative €128 million in the first quarter to positive €73
million ($96.4 million) in the second quarter. The €201 million
improvement was attributable to the sharp increase in the cash
inflow from operating activities, up €178 million ($235.1 million)
and lower investments, which were down €23 million ($30.4
million).
Share Repurchase
Infineon repurchased €128 million ($169 million) worth of
convertible bonds due May 2014 with a nominal amount of €47 million
($62 million) and 13 million own shares for €84 million ($111
million).
Outlook
Concurrent with the earnings release, the company provided its
guidance for the third quarter and fiscal 2013. Third quarter
revenues are expected to come in at about €1 billion, with all
segments expected to contribute to revenue growth. The Group's
Segment result margin for the third quarter is expected at
approximately 10% of revenues.
Based on the results, year to date, management expects revenue
in fiscal 2013 to decline year over year at the upper end of the
mid to high single-digit percentage range previously announced.
Thus the Segment Result Margin for the 2013 is expected to be at
the upper end of the mid to high single-digit percentage range.
Segment Wise, the ATV, PMM and CCS segments are expected to
report better than the Group average in fiscal 2013, while IPC is
expected to suffer from a revenue decline significantly higher than
the Group average.
Infineon currently has a Zacks Rank #4 (Sell). However, some
other companies operating in the same industry which can be
considered at the moment are ARM Holdings Plc
(ARMH), Form Factor Inc. (FORM) and
Integrated Device Technology Inc. (IDTI), all
having Zacks Rank #1 (Strong Buy).
ARM HOLDNGS ADR (ARMH): Free Stock Analysis Report
FORMFACTOR INC (FORM): Free Stock Analysis Report
INTEGR DEVICE (IDTI): Free Stock Analysis Report
INFINEON TECH (IFNNY): Free Stock Analysis Report
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