Earnings Preview: Broadcom

Broadcom (BRCM) is expected to report Q2 earnings after market close Tuesday, July 22, with a conference call scheduled for 4:45 p.m. ET.

Guidance

The consensus estimate is 36c for EPS and $$1.11B for revenue, according to First Call. Cowen expects GAAP EPS of 13c and revenue of $1.10B, essentially in-line with consensus and at the midpoint of revenue guidance from the company of $1.075B to $1.125B.

Analyst Views

Cowen expects Q3 revenue guidance to be up 4.5% QoQ, in-line with consensus and below normal seasonality. Cowen does remain concerned about the effects of macroeconomic weakness on Broadcom's customers, but Cowen's industry checks suggest that the core enterprise and broadband business are holding up well. Going forward, Cowen expects strong product cycles in Bluetooth, digital TV, and WiFi 802.11n to contribute to incremental revenue and profitability. Goldman expects upside to the quarter and guidance, but is cautious on the stock as expectations have become heightened and valuation stretched. Consensus for Q3 is 38c on $1.16B in revenue.

Key issues for the call: Progress on the wireless ramp at Nokia (NOK), effect of macro environment as 2/3 of sales are to U.S.-based customers, an update on royalties from Verizon (VZ) and Qualcomm (QCOM), commentary on inventory levels in the channel, and the continued progress on operating expense control.