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Broadcom Limited

Broadcom Ltd. reports financial results for the quarter ended July 31, 2017.We analyze the earnings along side the following peers of Broadcom Ltd. - STMicroelectronics NV ADR RegS, Qorvo, Inc., Texas Instruments Incorporated, Oclaro, Inc., International Business Machines Corporation and Vishay Intertechnology, Inc. (STM-US, QRVO-US, TXN-US, OCLR-US, IBM-US and VSH-US) that have also reported for this period.

  • Summary numbers: Revenues of USD 4463 million, Net Earnings of USD 483 million.
  • Gross margins widened from 28.01% to 48.15% compared to the same period last year, operating (EBITDA) margins now 15.26% from 28.43%.
  • Year-on-year change in operating cash flow of 71.96% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings growth from operating margin improvements as well as one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

Revenues (mil)44634190413941363792
Revenue Growth (%YOY)17.718.3133.7124.8118.6
Earnings (mil)483444244-570-287
Earnings Growth (%YOY)268.3138.6-35.3-221.3-217.6
Net Margin (%)10.810.65.9-13.8-7.6
Return on Equity (%)2.121.1-2.6-1.3
Return on Assets (%)3.93.62-4.6-2.3

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AVGO-US's change in revenue this period compared to the same period last year of 17.70% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that AVGO-US is holding onto its market share. Also, for comparison purposes, revenues changed by 6.52% and earnings by 8.78% compared to the immediate last period.Spreadsheet


The company's earnings growth has been influenced by the year-on-year improvement in gross margins from 28.01% to 48.15%. However the company's overhead costs have prevented it from fully capitalizing on these gross margin improvements. In fact, the company's operating margins (EBITDA margins) showed no improvement over the same period last year.Spreadsheet

STM-USSTM-USQRVO-USQRVO-USTXN-USTXN-USIBM-USIBM-USVSH-USVSH-USAVGO-USAVGO-USDifferentiated; Low CostDifferentiated; Low CostCommodity; Low CostCommodity; Low CostCommodity; High CostCommodity; High CostDifferentiated; High CostDifferentiated; High Cost

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company's performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.



AVGO-US's gross margin improvement has not produced any big difference in its working capital. Working capital days are currently 144.17, compared to last year's level of 88.26 days. This leads Capital Cube to conclude that the improvements in gross margins are likely from operating decisions and not trade-offs with the balance sheet.Spreadsheet

STM-USSTM-USTXN-USTXN-USOCLR-USOCLR-USIBM-USIBM-USVSH-USVSH-USAVGO-USAVGO-USCustomer FinancedCustomer FinancedCash StarvedCash StarvedSupplier FinancedSupplier FinancedCash RichCash Rich

Cash Versus Earnings - Sustainable Performance?It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.AVGO-US's change in operating cash flow of 71.96% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.Spreadsheet

STM-USSTM-USTXN-USTXN-USIBM-USIBM-USVSH-USVSH-USAVGO-USAVGO-USCash Flow based EarningsCash Flow based EarningsLikely Non-cash EarningsLikely Non-cash EarningsLow Cash Flow BaseLow Cash Flow BaseLikely Undeclared EarningsLikely Undeclared Earnings

The company's earnings growth has also been influenced by the following factors: (1) Improvements in operating (EBIT) margins from 0.53% to 15.26% and (2) one-time items. The company's pretax margins are now 12.28% compared to -11.08% for the same period last year.Spreadsheet

STM-USSTM-USQRVO-USQRVO-USTXN-USTXN-USOCLR-USOCLR-USOperation driven EarningsOperation driven EarningsOne-time FavorablesOne-time FavorablesLow Earnings BaseLow Earnings BaseOne-time UnfavorablesOne-time Unfavorables



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Broadcom Ltd. engages in the design, development and supply of analog and digital semiconductor connectivity solutions. It serves four primary end markets: wired infrastructure, wireless communications, enterprise storage and industrial & other. The company product's includes data center networking, home connectivity, broadband access, telecommunications equipment, smartphones and base stations, data center servers and storage, factory automation, power generation and alternative energy systems, and displays. The company was founded in 1961 and is headquartered in Singapore.CapitalCube does not own any shares in the stocks mentioned and focuses solely on providing unique fundamental research and analysis on approximately 50,000 stocks and ETFs globally. Try any of our analysis, screener or portfolio premium services free for 7 days. To get a quick preview of our services, check out our free quick summary analysis of AVGO-US.The information presented in this report has been obtained from sources deemed to be reliable, but AnalytixInsight does not make any representation about the accuracy, completeness, or timeliness of this information. This report was produced by AnalytixInsight for informational purposes only and nothing contained herein should be construed as an offer to buy or sell or as a solicitation of an offer to buy or sell any security or derivative instrument. This report is current only as of the date that it was published and the opinions, estimates, ratings and other information may change without notice or publication. Past performance is no guarantee of future results. Prior to making an investment or other financial decision, please consult with your financial, legal and tax advisors. AnalytixInsight shall not be liable for any party's use of this report. AnalytixInsight is not a broker-dealer and does not buy, sell, maintain a position, or make a market in any security referred to herein. One of the principal tenets for us at AnalytixInsight is that the best person to handle your finances is you. By your use of our services or by reading any of our reports, you're agreeing that you bear responsibility for your own investment research and investment decisions. You also agree that AnalytixInsight, its directors, its employees, and its agents will not be liable for any investment decision made or action taken by you and others based on news, information, opinion, or any other material generated by us and/or published through our services. For a complete copy of our disclaimer, please visit our website