Hittite Microwave Corporation (HITT) reported fourth quarter 2010 diluted earnings of 69 cents per share, a penny more than the Zacks Consensus Estimate of 68 cents. On a sequential basis the earnings remained flat but increased 53.3% from the previous year quarter.

The fiscal year 2010 earnings of $2.56 per share not only beat the Zacks Consensus by a penny but also increased 65.2% from the previous year.

Quarterly Highlights

Revenue of $65.6 million missed the Zacks Consensus Estimate of $66.0 million by a whisker, but was up 2.2% from the prior quarter and 50.1% compared to the previous year quarter.

On a geographical basis, revenue from customers in the United States was $30.0 million, which represented 45.7% of the company’s total revenue, and revenue from customers outside the United States was $35.6 million, which comprised the other 54.3% of total revenue.

For the fiscal year 2010, revenue earned by the company was $244.3 million, up 49.9% from the previous year but it fell short of the Zacks Consensus Estimate of $245.0 million.

Gross profit increased 49.5% from the year ago quarter to $48.8 million. Gross margin was 74.5% compared to 74.8% in the previous year quarter.

Operating profit increased 62.6% from the prior year quarter to $32.2 million. Operating margin was 49.1% compared to 45.5% in the prior year quarter.

Net bookings for 2010 were $254.9 million, an increase of 36.0% over bookings of $187.3 million recorded in 2009. As on December 31, 2010, backlog was $74.5 million compared to $63.9 million at December 31, 2009.

HITT exited the quarter with cash and cash equivalents worth $295.5 million.

Quarter Ahead  

For the forthcoming quarter, management expects revenue to be in the range of $65.5 million to $67.5 million. On the earnings front, management expects the diluted earnings per share to be in between 63 cents and 66 cents, which represents net income range of $19.2 million to $20.1 million. The net income outlook includes transaction costs and expected operating expenses attributable to Arctic Silicon Devices, which the company acquired in January 2011.

Conclusion

Analyst estimates had remained stable up to the earnings release as none of the five analysts covering the stock had raised or lowered their estimates. The average estimate was 68 cents when the company reported.

We note that Hittite Microwave Corp. has consistently exceeded estimates over the past year or so. The average surprise in the preceding 4 quarters is a positive 10.5%, and another positive surprise was therefore expected.

The top peers of the company include Analog Devices Inc. (ADI) and Avago Technologies Limited (AVGO).

Hittite Microwave Corp is currently a Zacks #2 Rank, which translates into a BUY on a short-term basis. We currently have a Neutral recommendation on the longer term.

 
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