Linear Technology Corp. (LLTC) reported second quarter 2011 diluted earnings of 70 cents per share (according to non-GAAP figure provided by the company) beating Zacks Consensus Estimate of 58 cents per share and also increased 70.7% from year-ago quarter of 41 cents. This also compares favorably with the prior-quarter earnings of 67 cents.

On a GAAP basis, the diluted earnings came at 62 cents that bettered the previous quarter earnings of 59 cents.

Quarter in Detail

Revenue for the reported quarter was $383.6 million, surpassing Zacks Consensus Estimate of $379.0 million. Though revenue decreased 1.3% sequentially, it recorded an increase of 49.5% from the prior-year quarter. Lower tax rate in the quarter benefited the company as the research and development tax credit was reinstated.

Gross profit decreased 1.3% sequentially but increased 54.6% from the year-ago quarter to $301.0 million and gross margin for the quarter was 78.5%.

Operating profit decreased 1.7% sequentially but increased 74.0% from the prior-year quarter to $201.1 million and operating margin was 52.4%. Non-GAAP net income was $161.9 million while GAAP net income was $143.7 million.

The company announced a raise in its dividend from 23 cents per share to 24 cents per share, which will be paid on March 2, 2011 to stockholders of record on February 18, 2011. This was the 19th consecutive year when the company had increased its dividend.

Quarter Ahead

The management expects revenue and earnings to decline by 6% to 10% sequentially in the forthcoming quarter. The management will temporarily under ship actual demand, in its core businesses, given the adjustment of customer bookings and safety stocks to comply with the company’s lead times.

Conclusion

Analyst estimates remained unchanged in the run up to the earnings release. The average estimate was 58 cents when the company reported earnings. We note that Linear Tech has consistently exceeded estimates over the past year or so. The average surprise in the preceding 4 quarters is a positive 13.5%, and another positive surprise was therefore expected.

Liner Tech faces competition from Analog Devices Inc. (ADI).

We currently have Zacks #3 Rank for Linear Tech on short term basis. We have an Underperform recommendation on long term basis.

 
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