What to Look for in Broadcom Earnings

September 1, 2016 by Chris Lange

Broadcom Ltd. (NASDAQ: AVGO) is scheduled to release its fiscal third-quarter financial results after the markets close on Thursday. This company exceeded earnings expectations for its first quarter operating as a combined company. Its increased scale and diversity already was proving very resilient, with strong product cycles in its now largest segment, wired. Can Broadcom keep it up this quarter?

It’s worth noting that Broadcom is the successor to Avago Technologies, after a successful acquisition back in February.

The consensus estimates from Thomson Reuters are $2.77 in earnings per share (EPS) on $3.76 billion in revenue. The same period from last year reportedly had $2.24 in EPS on $1.75 billion in revenue.

The company produces radio frequency (RF) front-end for LTE-enabled Apple products. Wall Street estimates that the company does 15% of its total business with Apple. Additional estimates are that the company has between a 13% and 17% revenue exposure to Apple in the wireless communications segment, which was guided up 10% or more quarter over quarter for the third quarter. Customer diversity and content for Samsung could be more than enough to offset slower Apple business.

Top Wall Street analysts like the leadership in the mobile, data center and broadband markets, and especially in the RF arena. Many on Wall Street see a cyclical rebound in industrial and communications demand. Some analysts think the company is growing earnings at 13% organically, and that could lift to 17% with mergers and acquisitions.

Ahead of the earnings report a fair number of analysts weighed in on Broadcom:

  • Cowen reiterated an Outperform rating with a $200 price target.
  • D.A. Davidson reiterated a Buy rating with a $190 price target.
  • Brean Capital reiterated a Buy rating with a $200 price target.
  • Credit Suisse has an Outperform rating and raised its target to $200 from $180.
  • Citigroup has a Buy rating with a $205 price target.
  • Barclays reiterated a Buy rating with a $185 price target.
  • B. Riley reiterated a Buy rating with a $200 price target.
  • Mizuho reiterated a Buy rating with a $190 price target.
  • Pacific Crest reiterated an Overweight.

In 2016 thus far, Broadcom has outperformed the broad markets, with the stock up 22%. Over the past 52 weeks, the stock is up as much as 50%.

Shares of Broadcom were trading at $176.66 on Thursday, with a consensus analyst price target of $195.22 and a 52-week trading range of $111.53 to $179.42.

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