Linear Technology (LLTC) will be having its fiscal third quarter earnings conference call later today. A first look at the numbers indicates that the company met expectations on both the top and bottom lines.
Revenue grew 6.1% after two quarters of decline, helped by improved sales across end markets, particularly industrial and automotive.
Increased revenues helped drive a 22 bp sequential expansion of the gross margin, although it still remains well below year-ago levels. Gross profit dollars were up 6.4%.
Operating profit dollars increased 5.2% sequentially, less than the increase in revenue. The higher level of expenses was on the R&D line. The operating margin was down 41 bps and 589 bps, respectively from the previous and year-ago quarters.
The balance sheet remains in moderately good shape, with inventories up 1.5%. Inventory turns went up a notch to 3.9X from 3.8X. The cash balance increased $4.9 million. DSOs went down again by a day to 42.
The positive guidance of a 4-8% sequential increase in revenue was provided on the basis of order trends, which management stated have been trending up. It is encouraging to note that Linear met its strong guidance in the last quarter after three quarters of misses. Traditionally, Linear always provided conservative guidance, so the company could be getting back in form.
Linear’s business is well diversified across end markets and geographies with nearly 2/3 of revenue coming from the high-margin industrial and communications markets. Additionally, Linear has defocused the computing market, which is a positive in the current environment where most of the growth is expected to come from lower-margin devices.
Linear shares have been allotted a Zacks Rank of #3, implying a Hold rating in the near term (1-3 months).
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