Robust Portfolio, Buyouts to Aid Broadcom (AVGO) Q4 Earnings
Broadcom Limited AVGO is slated to report fourth-quarter fiscal 2018 results on Dec 6. We believe that the company’s vast product portfolio, which serves multiple applications within four primary end markets (Wired Infrastructure, Wireless Communications, Enterprise Storage, and Industrial & Other), is likely to positively impact the to-be-reported quarter’s results.
Further, diversification of end market and customer base bodes well for the company.
Broadcom Inc. Price, Consensus and EPS Surprise
Broadcom Inc. Price, Consensus and EPS Surprise | Broadcom Inc. Quote
Click here to know how the company’s overall Q4 performance is likely to be.
Portfolio Strength: Key Catalyst
Broadcom is benefiting from strong demand for its wireless solutions. In the last reported quarter, Wireless Communications (25% of total revenues) was flat year over year to roughly $1.29 billion. The company benefited from the seasonal rise in the North American smartphone OEM customers, which was partially offset by decline in its’ large wireless customers.
The Zacks Consensus Estimate for the Wireless Communications segment revenues are pegged at $1.631 billion.
Meanwhile, Enterprise Storage (25% of total revenues) increased 70% from the year-ago quarter to $1.25 billion. The improvement can primarily be attributed to contribution from the recently-acquired Brocade Fibre Channel switch business coupled with strong enterprise IT spending.
The Zacks Consensus Estimate for the Enterprise Storage segment revenues are pegged at $1.222 billion.
Wired Infrastructure revenues (45% of total revenues) totaled $2.3 billion, up 4% from the year-ago quarter. The upside was primarily driven by seasonal retrieval in demand for broadband access and robust demand for cloud data centers.
Broadcom’s expanding product portfolio makes it well poised to address the needs of rapidly growing technologies like Internet of Things (IoT) and 5G.
However, decline in its large wireless customers and sluggish spending on video access in the China optical markets remains a concern.
Zacks Rank & Key Picks
Currently, Broadcomhas a Zacks Rank #4 (Sell).
Some better-ranked stocks in the broader technology sector are Upland Software UPLD, Tesla, Inc. TSLA and Twitter, Inc. TWTR, each flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth rate for Upland Software, Tesla and Twitter is currently pegged at 20%, 35% and 22.1%, respectively.
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