Broadcom Corporation (BRCM), a leading chipmaker of products used in wired and wireless communications, is scheduled to report the third quarter results on Thursday, October 22, 2009. In the last four quarters, the company's actual earnings exceeded the market's consensus significantly.
Analysts estimates for the quarter ending September 2009 (Q3) range from a low of $0.29 to a high of $0.37, with a consensus of $0.329. For the fiscal quarter ending September 2009, the consensus EPS forecast has increased over the past week from $0.328 to $0.329 (0.30%) and increased over the past month from $0.320 to $0.329 (2.81%). Of the 24 analysts making quarterly forecasts, 3 raised and none lowered their forecast.
Since 1998, the company's Q3 revenue has been trending up over Q2 revenues, save the year 2006. I join with the analysts who forecast increasing revenue and EPS for Broadcom. In fact, few days back, the company said that it expects revenues to grow by 7% – 14% sequentially in the third quarter fueled by growth within the mobile and wireless targeted end market, which in turn is driven by new product ramps and the upcoming holiday season. This implies revenue guidance between $1.11 billion and $1.18 billion. However, year-over-year the company's revenue is expected to drop.
In the second quarter of 2009, Broadcom's earnings were better than in the first quarter of 2009 but were lower than the same quarter in 2008. Earnings drop in Q2-2009 was due to a decrease in product gross margin. However in Q3-2009, product gross margin is also expected to increase. Operating expenses are projected to increase by $15 million – $20 million driven by tapeouts and prototyping costs of newer solutions. Order patterns seem to have normalized, after six months of inventory corrections in the semiconductor industry. The company's management expects that this trend will continue throughout 2009 and demand is not expected to turn around before 2010.
For the fiscal year ending December 2009, the consensus EPS forecast has increased over the past week from $0.992 to $0.994 (0.20%) and increased over the past month from $0.967 to $0.994 (2.79%). Of the 20 analysts making yearly forecasts, 6 raised and none lowered their forecast. Over the next five years, the company is expected to grow earnings at an average annual rate in excess of 14.5%.
The company's stock closed Wednesday at $30.31, compared to the 52 week range of $13.15 and $31.2. I guess the stock is overvalued slightly.
