Earnings Preview: Broadcom

| About: Broadcom Limited (AVGO)

Broadcom (BRCM) is expected to report Q1 earnings after the market close on Tuesday, April 26, with a conference call scheduled for 4:45 pm ET.


The consensus estimate is 59c for EPS and $1.81B for revenue, according to First Call. Broadcom shares went from $46 to $38 over the past three months after missing Q4 earnings. The stock has been rallying hard recently, as hope springs eternal that management will redeem itself with the Q1 report. Better than expected results for Q1 might offset investors' concerns over company's predicted performance in Q2. Broadcom on its last earning call guided for Q1 revenues to decline 5%-10% quater-over-quarter to about $1.75B-$1.85B. Management had indicated the broadband and mobile segments to decline sequentially while networking revenues was guided to be flat quarter-over-quarter. Management also guided for GM to remain flat quarter-over-quarter at roughly 51% and for opex to increase by $45M-$55M quarter-over-quarter.

Analyst Views

Deutsche Bank believes that Q2 estimates could prove slightly conservative. For Q2, Deutsche is expecting Broadcom to guide for modest revenue growth driven by Broadband and Mobile. Specifically, Deutsche forecasts total revenue of $1.86B, up 2% quarter-over-quarter, with the sub-segment mix being mobile +3% quarter-over-quarter, broadband +3% quarter-over-quarter and enterprise flat quarter-over-quarter. Deutsche sees potential for slight upside to its revenue estimate driven by the Q2 ramps of the new iPhone/iPad. Deutsche also models GM rising +20bps quarter-over-quarter, opex to grow 1% quarter-over-quarter, share count to rise +1% quarter-over-quarter and GAAP/PF EPS of 40c/60c. Consensus for Q2: 65c on $1.90B in revenue. Key focus items: Impact from Japan. Handset ramps. Comments on GM and OM. inventory, cash usage and share count.