U.S. Markets closed

Semtech Trims Q4 Guidance

Zacks Equity Research

Recently, Semtech Corporation (SMTC) lowered its revenue and earnings expectations for the fourth quarter of fiscal year 2014.

The company now expects sales of $120.0–$130.0 million versus its previous guidance of $132.0–$144.0 million. The GAAP earnings outlook has been trimmed to 0–8 cents from the previous guidance of 9–18 cents, while non GAAP earnings outlook is down to 18–24 cents from the previous guidance of 29–37 cents.

Management stated that the guidance cut was on account of continuous delays in capital expenditure by telecom companies and the release of a new consumer mobile platform.

Additionally, the company announced that it is combining its Advanced Communications and Gennum Product Groups into one new group named Signal Integrity and Timing Product Group to make better use of natural synergies. Gary Beauchamp will lead the new Product Group.

In order to improve its competitive position in both the long and short run, it is imperative that Semtech continues to undertake various initiatives and develop new products. We believe the restructuring of its product groups will have positive implications on the company’s financials, going forward.

Semtech manufactures a wide range of analog and mixed-signal semiconductors, including Standard Semiconductor Products, Rectifier and Assembly Products and Other Products. Though we remain encouraged by the company’s new design wins and various product introductions, the slowing demand and challenges in several key end markets will likely weigh on the near-term growth prospects.

The company reported a weak quarter, with revenues of $141.0 million, down 14.5% sequentially and 12.4% year over year. However, earnings of 27 cents per share were in line with the Zacks Consensus Estimate.

Other Stocks to Consider

Currently, Semtech has a Zacks Rank #5 (Strong Sell). Other better-ranked stocks that are performing well at current levels include Montage Technology Group Ltd (MONT), Inphi Corp (IPHI) and Microchip Techcnology (MCHP). All these stocks carry a Zacks Rank #2 (Buy).

Read the Full Research Report on SMTC
Read the Full Research Report on MONT
Read the Full Research Report on MCHP
Read the Full Research Report on IPHI

Zacks Investment Research