Altera Corporation (ALTR) reported better-than-expected results for the first quarter on April 20, 2010. Earnings per share came in at 50 cents, easily beating the Zacks Consensus Estimate of 40 cents. Following the release of the first quarter results, most Wall Street analysts have upped
their estimates in the last 30 days.
Altera is a leading supplier of programmable chips and related products to the communication and other industries.The company primarily competes with Xilinx Inc. (XLNX) in this space.
Let us now take a look at the results of the earnings announcement, subsequent analyst estimate revisions and Zacks ratings for the short-term and long-term outlook for the stock.
Earnings Report Review
The first quarter results were at the high-end of management’s guidance. Sales grew 52% year over year and were up 10% sequentially. The growth in sales was driven by new products, which increased 29% sequentially. New products include 65-nanometer and 40-nanometer field programmable gate arrays (FPGAs) and HardCopy application-specific integrated circuit (ASIC)
and the latest complex programmable logic devices (CPLD) family (all products, which are in the design win and production ramp phase of their lifecycle).
We discussed the results in detail here: Altera Tops Expectations
Earnings Estimate Revisions – Overview
Estimates took an upswing for Altera ever since the earnings release as the company continues to meet or exceed expectations. The guidance provided by management was also encouraging, leading to a rise in estimates by almost all analysts covering the stock.
Agreement of Analysts
There is consensus in estimate revisions. For 2010, all 22 analysts covering the stock raised their estimates in the last 30 days after the company reported strong results for the first quarter. There
were no revisions in the opposite direction. For 2011, 21 of the 22 analysts covering the stock raised their estimates, with no downward revisions.
For the quarter (ending June), all 23 analysts covering the stock raised their estimates, with no revision in the opposite direction.
Magnitude of Estimate Revisions
The current Zacks Consensus Estimate for 2010 is $1.97, up 37 cents in the last 30 days. For 2011, the current Zacks Consensus Estimate is $1.98, up 15 cents in the last 30 days.
Altera has constantly been exceeding expectations. In the most recently reported quarter, the company reported earnings were 25.0% above the Zacks Consensus Estimate. On an average, Altera has come ahead of the Zacks Consensus Estimate by 21.1% in the last four quarters.
The current Zacks Consensus Estimate for the third quarter is 52 cents, up 11 cents in the last 30 days.
Neutral on Altera
We expect overall revenue growth to pick up in 2010, leading to improvements in both top and bottom line. The recovery in the semiconductor market has been quite strong after going through a weak first half in 2009. Hence, the outlook on most chip-making companies is upbeat.
Management expects sales to be up 8% to 12% in the second quarter and stated that demand has strengthened in the past several quarters and most customers have more visibility as they place orders in a timelier manner. The company has a pipeline of 28 nanometer products, which it believes will maintain the growth momentum of the past 2 quarters. As of now, we maintain a Neutral rating on the stock.
About Earnings Estimate Scorecard
Len Zacks, PhD in mathematics from MIT, proved over 30 years ago that earnings estimate revisions are the most powerful force impacting stock prices. He turned this ground breaking discovery into two of the most celebrating stock rating systems in use today. The Zacks Rank for stock trading in a 1 to 3 month time horizon and the Zacks Recommendation for long-term investing (6+ months). These “Earnings Estimate Scorecard” articles help analyze the important aspects of estimate revisions for each stock after their quarterly earnings announcements. Learn more about earnings estimates and our proven stock ratings at http://www.zacks.com/education/
Read the full analyst report on “ALTR”
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