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Maxim Shares Rose 5% after Fiscal 2Q16 Earnings

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Jan. 25 2016, Updated 4:36 p.m. ET

Fiscal 2Q16 highlights

Maxim Integrated Products (MXIM) reported its fiscal 2Q16 earnings and beat analysts’ revenue estimates. Unlike Cree (CREE) and Xilinx (XLNX), Maxim posted strong guidance for fiscal 3Q16. Its shares rose 5% to open at $32.61 on January 22. The company undertook several measures to achieve annual savings of $180 million.

In this series, we’ll look at the company’s performance in fiscal 2Q16 and the factors that will drive future growth.

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Maxim beats analysts’ estimates

In fiscal 2Q16, Maxim’s revenue fell 10% year-over-year to $511 million, topping the analyst estimate of $505 million. The 34% revenue growth in the automotive segment was offset by declines in the computing, consumer, industrial and communications, and data center segments.

The company’s non-GAAP[1. generally accepted accounting principles] earnings per share fell 3% year-over-year to $0.32, in line with the analyst estimate.

Profitability

On a non-GAAP basis, the company’s gross margin rose from 60.3% in fiscal 2Q15 to 60.5% in fiscal 2Q16 despite a decline in sales. The company reduced its non-GAAP operating expenses by 13% year-over-year to $187 million in fiscal 2Q16. The decline was a result of the company’s efforts to streamline its product portfolio. However, its non-GAAP net income fell ~1% year-over-year to $92.8 million.

Even Advanced Micro Devices (AMD) has managed to reduce its expenses by streamlining its product portfolio.

Cash position

In fiscal 2Q16, the company earned $182 million in cash from operating activities and spent $14 million in capital expenditure, $23.15 million in share buybacks, and $85.7 million in dividend payments. As of December 26, 2015, the company’s total cash reserve stood at $1.77 billion and long-term debt stood at $1 billion. The company earned $50 million in cash by selling off its facilities in San Jose and Batangas, the Philippines.

The company declared a dividend of $0.30. This means an annual dividend of $1.2 and an annual dividend yield of 3.87%.

In the next part of this series, we’ll look at the key segments that drove the company’s revenue in fiscal 2Q16. The PowerShares QQQ ETF (ETF) has just above 8% exposure to semiconductor stocks, including 0.19% to MXIM and 0.26% to XLNX.

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