Why Maxim Is Doing Better Than Linear

Earnings have come and gone, and Linear Technology Corp. (NASDAQ: LLTC) lags behind Maxim Integrated Products Inc. (NASDAQ: MXIM). The problem was not necessarily earnings, but really more on the side of guidance.

Linear’s guidance for the coming quarter suggests a relatively large sequential sales decline. The fear, which is also why it is hurting Maxim, is that there may be a broader weakness in the chip markets. Is it possible that Intel’s upside is an outlier?

Linear reported quarterly revenue of $379.5 million. This was up 2% sequentially and was almost 4% higher than a year ago, but revenue was also at the lower end of Linear’s previous guidance range of 2% to 5% growth.

Guidance proved to be a problem and the September quarterly revenue is now expected to decline 7% to 12% sequentially, which would translate to $334 million to $353 million. The mid-point of that guidance range of almost $344 million is against a consensus of almost $395 million.

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Linear blamed its lower guidance on bookings that slowed materially, and the company even noted it was in all regions and in its major end markets, with industrial and computer cited as well. While the company maintained the stance that bookings have improved since the end of the June quarter, the reaction here may speak for itself.

As for Maxim, its fiscal first-quarter guidance doesn’t look half bad. The company expects EPS in the range of $0.38 to $0.44 and revenue in the range of $545 million to $585 million. Revenues would be nearly double those in the fiscal 2015 year. There are consensus estimates of $0.42 in EPS on $600 million.

In terms of what analysts had to say:

  • Maxim was raised to Buy from Hold at Evercore ISI.
  • Merrill Lynch raised its rating on Maxim to Buy from Underperform with a $36 price objective.
  • Buckingham Research downgraded Maxim to a Neutral rating and lowered its price target to $42 from $60.

Shares of Linear were down 0.9% to $40.61 on Friday morning. The stock has a consensus analyst price target of $42.06 and a 52-week trading range of $37.56 to $49.57.

Shares of Maxim were up 7% to $32.90, in a 52-week trading range of $25.28 to $36.37. The consensus price target is $35.59.

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