US Chip Companies Seen Meeting 1st Quarter Views, Cautious On Outlook
biz.yahoo.com
By: Donna Fuscaldo, Of DOW JONES NEWSWIRES
NEW YORK -(Dow Jones)- Aided in part by inventory replenishments, most U.S. semiconductor companies are expected to meet Wall Street's forecasts when they report earnings for the first quarter.
Although the three months to March mark the second consecutive quarterly period in which chip makers are likely to achieve targets, analysts cautioned that companies' forecasts for the current quarter ending in June are likely to be guarded.
Chip makers' insight into future business conditions remains poor, which should mean cautious financial targets for the second quarter, said Needham & Co . analyst Dan Scovel.
During the first quarter, semiconductor makers benefitted from manufacturers replacing worked-off inventory, particularly in the personal-computer market but also in the communications industry. But even with the restocking of inventory, end-market demand hasn't rebounded.
"Major buyers of semiconductors from PC makers to handset makers to networking equipment makers still show few signs of recovery," wrote Merrill Lynch & Co . analyst Joseph Osha in a recent report.
Evidence continues to mount that the semiconductor business is moving into a cyclical recovery, but the disconnect between economic measures and data from information technology hardware companies is "notable," he said.
No Surprises Likely At Intel
While Intel Corp. (NasdaqNM: INTC - news) 's (INTC) first quarter isn't likely to show any surprises, considering the chip maker provided a mid-quarter update last month, Daniel Niles, an analyst at Lehman Brothers Inc., said estimates for the June-ended quarter may be too high.
Demand for PCs in the second quarter typically is lackluster, Niles said. In addition, most companies will have completed replenishing their PC inventories by then.
For the just-ended quarter, Niles expects Intel, Santa Clara, Calif. , to post earnings of 15 cents a share and revenue of $6.8 billion when it reports April 16 . For the second quarter, Niles sees Intel earning 14 cents a share on revenue of $6.6 billion.
On average, according to Thomson Financial/First Call, analysts expect Intel to post earnings of 15 cents a share on revenue of $6.79 billion in the first quarter. In the year-ago first quarter, Intel posted earnings, excluding items, of 16 cents a share and revenue $6.68 billion. For the second quarter, the consensus calls for Intel to earn 15 cents a share and report revenue of $6.67 billion.
Morgan Stanley analyst Mark Edelstone also expects Intel to post earnings of 15 cents a share and revenue of $6.8 billion for its just-ended quarter. He said that on top of inventory replenishments, Intel benefitted from tight expense controls and a richer mix of products. He said Intel's second-quarter performance will likely be seasonally normal.
"The (second) quarter ends up typically being down slightly," he said.
Edelstone is calling for Intel to post earnings of 16 cents a share and revenue of $6.85 billion for its second quarter.
AMD Seen On Target
Intel rival Advanced Micro Devices Inc. (AMD) is also expected to meet analysts' targets for the first quarter.
During the quarter, AMD's average selling prices for microprocessors held firm, but its flash memory business, which accounts for about 20% of its revenue, saw some weakness, said Needham's Scovel. He is calling for AMD to post a loss of 5 cents a share and revenue of $904 million, when the Sunnyvale , Calif. , company reports first-quarter results April 17 .
The average analyst estimate, according to Thomson Financial, puts AMD's loss at 6 cents a share on revenue of $900.8 million. In the year-ago first quarter, AMD reported earnings of 37 cents a share and revenue of $1.19 billion.
Morgan Stanley's Edelstone, who expects AMD to post a loss of 9 cents a share on revenue of $905 million, said that demand for flash memory, while weak in the March quarter, will start to rise again. Edelstone expects AMD to provide a flat outlook, although he said the chip maker may be able to make a small advance in the June quarter. The consensus for the second quarter is for AMD to post a loss of 1 cent a share on revenue of $909 million.
Surprise By Texas Instruments (NYSE: TXN - news) ?
While PC chip makers are expected to report in-line earnings for the March quarter, one company that may surprise on the upside, albeit slightly, is Texas Instruments Inc. (TXN).
Morgan Stanley's Edelstone is calling for Texas Instruments to report revenue of $1.8 billion and break-even earnings. Still, he said there's room for an upside surprise.
When Texas Instruments reports earnings April 15 , Edelstone said the company will confirm that its book-to-bill ratio improved during the quarter. Also helping the Dallas chip maker in the March quarter was its distribution business. Texas Instruments recognizes revenue when a product is shipped to the distributor rather than when it gets sold through, said Edelstone. And with inventory liquidated in the fourth quarter, it wouldn't be surprising if distribution revenue was up in the first quarter, he said.
For the second quarter, Edelstone said he expects Texas Instruments to forecast a sequential increase in semiconductor revenue and to see a seasonal uptick in sales of its calculators. Edelstone is calling for Texas Instruments to post earnings of 4 cents a share and revenue of $1.93 billion in the second quarter.
Analysts on average expect the company to post flat earnings per share for the first quarter on revenue of $1.81 billion. In the year-ago first quarter, Texas Instruments reported earnings of 18 cents a share, excluding items, and revenue of $2.53 billion. For the second quarter, the analyst consensus calls for Texas Instruments to report earnings of 3 cents a share and revenue of $1.92 billion.
Lehman's Niles also said Texas Instruments could beat his estimate for a loss of 1 cent a share and revenue of $1.8 billion in the March quarter, but expressed concern over the June quarter. While the company is optimistic about its wireless business, Niles said it doesn't mesh with end demand, which isn't good.
Hazy Summer Quarter
Analysts aren't expecting earnings surprises from other communications chip makers such as Broadcom Corp. (NasdaqNM: BRCM - news) (BRCM) and PMC-Sierra Inc. (PMCS).
"I don't think a lot (of the companies) will benefit to beat (targets) right now with visibility still tough," said Sandy Harrison, an analyst at Banc of America Securities.
Since it's unclear what the June quarter will look like, "it's almost better to keep (upside) in the bank for the June quarter," he said.
Harrison is calling for Broadcom to post a first-quarter loss of 10 cents a share and revenue of $236 million when it reports April 24 , compared with the analyst consensus for a loss of 10 cents a share and revenue of $237 million. In the year-ago first quarter, Broadcom had pro forma earnings of 9 cents a share and revenue of $318 million
Meanwhile, Harrison expects PMC-Sierra to lose 10 cents a share and post revenue of $51 million when it reports for the first quarter on April 18 . Analysts, according to Thomson Financial, have PMC-Sierra weighing in with a loss of 12 cents a share and revenue of $51 million. In the year-ago first quarter, the chip maker had pro forma earnings of 2 cents a share and reported revenue of $120 million.
Another area of the chip market that should post in-line earnings results is capital equipment makers. While it's no secret that companies such as Applied Materials Inc. (AMAT) have suffered from declines in their customers' capital spending, the trend to outsource chip production to foundries may help the equipment makers.
Major foundries like Taiwan Semiconductor Manufacturing Co . (TSM) and United Microelectronics Corp. (UMC) are seeing new orders, and Applied Materials (NasdaqNM: AMAT - news) will be a major beneficiary of that, said Jack Geraghty, an analyst at Gerard Klauer Mattison. Geraghty is calling for Applied Materials to post fiscal second- quarter earnings of 6 cents a share and revenue of $1.1 billion when it reports May 14 .
Analysts expect Applied Materials to post earnings of 3 cents a share and revenue of $1.03 billion. In its year-ago fiscal second quarter, the chip equipment maker earned 32 cents a share excluding items and revenue of $1.91 billion.
-Donna Fuscaldo, Dow Jones Newswires; 201-938-5253; donna.fuscaldo@ dowjones.com
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The Barron's article will definitely hurt us long investors on Monday.
Bollinger Bands constricting as in the SOX are often followed by a move lower before the real rise begins.
bollingerbands.com
G have you read this on Bollinger Bands? Have you seen a %b indicator on any of the charts you have worked with?
Thanks, RtS |
