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How Apple Could Affect Broadcom’s Fiscal 4Q16 Earnings

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Part 5
How Apple Could Affect Broadcom’s Fiscal 4Q16 Earnings PART 5 OF 12

What Investors Should Expect from Broadcom’s Fiscal 4Q16 Earnings

Broadcom’s fiscal 4Q16 earnings expectation

Earlier in the series, we learned that Broadcom (AVGO) is acquiring Brocade Communications (BRCD) mainly to increase its cash flow and EPS (earnings per share). Broadcom has no plans to expand with the acquisition. Brocade’s earnings will be accretive to Broadcom’s fiscal 4Q17 earnings.

In the meantime, Apple (AAPL) will drive Broadcom’s growth in fiscal 4Q16.

What Investors Should Expect from Broadcom’s Fiscal 4Q16 Earnings

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Revenue estimate

After reporting a strong 7% quarter-over-quarter revenue rise in fiscal 3Q16, Broadcom expects to report even stronger growth in fiscal 4Q16. It expects its fiscal 4Q16 non-GAAP (generally accepted accounting principles) revenue to rise 11% quarter-over-quarter to $4.1 billion at the midpoint.

The strong growth in the wireless segment will be partially offset by falls in the industrial segment. Meanwhile, revenue from the wired and storage segments are likely to remain flat sequentially.

Broadcom revises its guidance

On November 2, 2016, Broadcom revised its fiscal 4Q16 guidance from the earlier range of $4.0 billion–$4.2 billion to $4.1 billion–$4.2 billion, including estimated licensing revenue of $10 million. This revised guidance came after Broadcom’s key customer, Apple, reported better-than-expected iPhone sales. Apple is currently facing a supply shortage as the discontinuation of the Samsung (SSNLF) Note 7 drove customers to the iPhone 7. This development likely drove Broadcom’s fiscal 4Q16 revenue.

Analysts estimate that Broadcom will report revenue of $4.1 billion in fiscal 4Q16. In the past five quarters, the company has exceeded analysts’ estimates by an average of 0.8%. If the company maintains a similar trend, it could report revenue of $4.2 billion in fiscal 4Q16.

EPS estimate

For fiscal 4Q16, analysts expect Broadcom to report non-GAAP EPS (earnings per share) of $3.31, a rise of 14.5% quarter-over-quarter. In the past five quarters, the company has exceeded analysts’ estimates by an average of 5.2%. If the company maintains a similar trend, it could report EPS of $3.5 in fiscal 4Q16.

Next, we’ll look at Broadcom’s profitability in fiscal 4Q16.

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