#Broadcom (AVGO) reports fiscal 2016 third-quarter earnings on Thursday. I think the company will beat the consensus estimate and raise guidance. In the last year, shares of Broadcom are up 38%. Aided by the merger with #Avago, Broadcom is poised to increase sales 90% in fiscal 2016 and 23% next year. Growth is coming from a broad array of industries, including wireline, wireless and the industrial market. The company took on $14 billion in debt to complete the merger between Avago and Broadcom, but it should be able to realize some cost savings from the merger and drive double-digit earnings growth. Management said it plans to cut $750 million in operating costs over the next 18 months. Toward that end, earlier this month Broadcom was able to chop its annual interest expense by $100 million by refinancing some of its older high-rate debt. That savings should flow down to earnings in the coming quarters.
Broadcom competes in four market segments that should see solid growth this year and next. The largest segment, wireline, represents approximately half of the company's revenue. The wireline business, which is mostly fiber optic components and semiconductor interface chips for enterprise data centers and telecom equipment, is expected to be a $6.6 billion business this year. The wired business looks like it can grow by mid-single digits over the next two years.
The enterprise storage business is about 15% of revenue and is another mid-single-digit grower. Storage and wireline are solid, profitable businesses that should continue their current trajectory over the next two years.
https://www.thestreet.com/story/13687247/2/broadcom-is-powering-ahead.html
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