Broadcom Corp. (BRCM) recently hit a new multi-year high on much better than expected Q1 results that saw revenue jump 71% from last year. Estimates are on the rise, helping to keep the valuation picture in check with a forward P/E of 18X.
Company Description
Broadcom Corp. designs and develops semiconductors for wired and wireless applications. The company sells its Systems-on-Chip (SOC) to a broad range of industries, including broadband, mobile devices and infrastructure. Broadcom was founded in 1991 and has a market cap of $18 billion.
Broadcom’s business has rebounded sharply from it’s 2009 lows as both consumer and corporate spending have gained traction on a stronger global economy. This dynamic was on full display on April 27 when the company posted awesome Q1 results that easily beat expectations.
First-Quarter Results
Revenue for the period was up 71% from last year to a record $1.46 billion. Earnings also came in strong at 40 cents, 33% ahead of the Zacks Consensus Estimate. The company has been hot over the last year, boasting an average earnings surprise of 115%.
Broadcom’s saw strength in three of its major segments from just the previous quarter, with infrastructure up 15%, mobile handsets/devices up 10% and broadband up 3%.
Looking forward a bit, the company’s expects strong results from its set-top box line, with shipment volumes set to remain strong through the year. Broadcom also cheered China’s legislative changes that will allow cable operators to offer voice and data services and a push towards HD that will drive the company’s set-top HD business.
Strong Balance Sheet
Broadcom continues to maintain and strengthen its already awesome balance sheet, with cash and equivalents totaling $2.4 billion against no debt.
Estimates Jump
The analysts were encouraged by Broadcom’s strong Q1 results, with the current-year estimate adding 49 cents to $1.82 and the next-year estimate adding 50 cents to $2.05, a solid 12% growth projection.
Valuation
With a forward P/E of 18.5X, shares of BRCM trade at a discount to the industry average of 21X. Its P/B multiple of 4X is a premium to the industry average of 2X.
The Chart
Shares of BRCM jumped higher to a multi-year high on the good quarter before dipping lower on the big market sell off. The long-term trend is still bullish, take a look below.
Michael Vodicka is the Momentum Stock Strategist for Zacks.com. He is also the Editor in charge of the market-beating Zacks Surprise Trader Service. Zacks Investment Research
