Shares of Broadcom Ltd. (NASDAQ: AVGO) surged nearly 5% on Friday after the chipmaker reported a big earnings beat and doubled its dividend. Its fiscal fourth-quarter revenue rose 124% annually to $4.13 billion, beating estimates by $20 million. Net income from continuing operations grew 20% to $1.55 billion, or $3.47 per share, beating expectations by $0.09 per share.
The key facts
Broadcom Ltd. is the successor to Avago Technologies Ltd., and most of that growth came from Avago’s acquisition of Broadcom Corp., a deal that closed back in February. Year-over-year comparisons are between the new Broadcom and the old Avago. The acquisition boosted wired infrastructure revenues by 449% annually to $2.07 billion during the quarter and wireless communications revenue by 98% to $1.35 billion. However, enterprise storage revenue fell 12% to $561 million, and industrial/other revenues only improved 8% to $155 million. It also gained another $200 million from completing divestitures, and doubled its interim dividend to $1.02 per share.
Broadcom expects non-GAAP revenues of $4 billion to $4.15 billion for the current quarter, beating prior estimates of $3.96 billion. Analysts expect Broadcom’s revenue to rise 24% in fiscal 2017 and another 6% in 2018. Earnings are expected to improve 22% this year and 7% next year. That’s a higher growth rate than its main rival Texas Instruments, which is expected to respectively grow its revenue and earnings by just 2% and 12% this year. However, TI’s forward dividend yield of 2.8% remains higher than Broadcom’s forward yield of 2.3%.
Wall Street is optimistic
Analysts were broadly bullish after the earnings report. B. Riley’s Craig Ellis, who forecasts that the stock will rise more than 30% to $235, believes that strength in the optical and data center market should offset a seasonal drop in wireless revenues. Canaccord Genuity analyst Mike Walkley believes that Broadcom could rise 40% to $250, based on robust sales of wireless components for iPhones. Those bullish takes could give Broadcom, Texas Instruments, and their semiconductor peers a big boost this week.
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