We maintain our NEUTRAL recommendation on TriQuint Semiconductor Inc (TQNT).
Last month, TriQuint reported disappointing results for the fourth quarter and missed the Zacks Consensus Estimate due to increased operating expenses.
Following the disappointing results, three out of the four analysts covering the stock have decreased their estimates while only analyst upped his estimate. Earnings estimates for 2011 have decreased by two cents in the last thirty days.
For the upcoming quarter, earnings estimates are down by four cents as all the four analysts covering the stock lowered their expectations given the weaker-than-expected guidance provided by management.
TriQuint reported revenues of $253.4.0 million in the fourth quarter of 2010, up 31% year over year and up 7% sequentially, which surpassed the Zacks Consensus Estimate of $251 million. The reported revenue was in line with management’s expectation of $245 million – $255 million.
Net income fell 62.1% sequentially to $42.5 million but more than doubled from the year-ago level of $17.5 million. Earnings per share came in at $0.25 per share compared with $0.69 in the year-ago quarter. Excluding restructuring charges but including stock-based compensation, earnings per share came in at $0.22, falling short of the Zacks Consensus Estimate of $0.25.
The company also issued a disappointing outlook for the first quarter as revenue from mobile devices is expected to decline while revenue from defense and networks is expected to be flat. Going forward, TriQuint expects its top line to grow 20% in 2011. For the first quarter, TriQuint expects revenues between $215 million and $225 million, which is below the Zacks Consensus Estimate of $230 million.
TriQuint expects revenues from defense and aerospace to come around $20 million per quarter in the first half of 2011 and grow sequentially in the second half as this market is characterized by lumpy order patterns tied to major program timing.
On a positive note, smartphones are expected to continue their phenomenal growth in 2011, and tablets continue to gain traction as well. The two important areas where the handset market is expected to grow in 2011 are GSM phones and smartphones. The company provides content to all leading smartphone providers (Apple, Samsung and Motorola to name a few).
The RF section has become more complex within smartphones, with requirements for voice, multiple data bands, Wi-Fi, and GPS. The company is focusing on launching a low cost transit module for GSM and expanding its product offerings to 3G platforms. Smartphones are expected to increase by more than 40% this year and require four to six times the RF content per device compared with voice-only phones.
The market is also developing mobile devices that are taking new forms, such as small laptop notebooks (or netbooks), tablets and mobile Internet devices (MIDs). Combined with traditional laptops and WLAN attachments to handsets, these new forms have created a significant growth opportunity.
We remain cautiously optimistic of the company’s projected growth path. Our recommendation is supported by the Zacks #3 Rank, which translates into a short-term rating of Hold.
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