Following an upgrade in outlook by chipmaker Altera Corporation (ALTR), estimates are on the upswing.

Earlier this month, Altera revised its outlook for the first quarter of 2010. The company now expects revenues to be up 7% – 10% sequentially compared to the previous guidance of 5 – 10%. The new outlook implies a revenue guidance of $390.5 million – $401.5 million.

Agreement – Estimate Revisions
                                                                                     
The recovery in the semiconductor market has been quite strong after a weak first half of 2009. Hence the outlook on most chip-making companies is upbeat. For 2010, twelve of the twenty-three analysts covering the stock raised their estimates in the last 30 days following management’s upgrade in guidance. There were no revisions in the opposite direction.

For 2011, seven of the twenty-two analysts covering the stock raised their estimates, with no downward revisions.

For the quarter (ending March), twelve of the nine analysts covering the stock raised their estimates, with no revision in the opposite direction.

Magnitude Consensus Estimate Trend

The current Zacks Consensus Estimate for 2010 is $1.59, up seven cents in the last 30 days following management’s upgrade in guidance.

For 2011, the current Zacks Consensus Estimate is $1.72, up five cents in the last 30 days and signaling an 8.00% year-over-year growth in the bottom line.

Altera has constantly exceeded expectations. In the most recently reported quarter, the company reported earnings 17.24% above the Zacks Consensus Estimate. On average, Altera has come ahead of the Zacks Consensus Estimate by 11.75% in the last four quarters.

The current Zacks Consensus Estimate for the third quarter is 40 cents, up one cent in the last 30 days.

Neutral on Altera

Altera expects solid growth from new products in the first quarter. All four vertical market segments (Telecom & Wireless, Industry Automation, Military & Auto, Networking, Computer & Storage and Others) are likely to report sequential improvements. Growth continues in the Telecom & Wireless market segment as communications equipment manufacturers respond to the ongoing Asian demand.

We expect overall revenue growth to pick up in 2010, leading to improvements in both the top and bottom line.

As of now, we maintain a Neutral rating on the stock.
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