Watch Maxim’s Earnings on Thursday if You Want to Know How Other Chipmakers Are Faring

The analog chipmaker's quarterly results after the close should serve as a good read-through for rival chipmakers such as Texas Instruments and Analog Devices.
By Jaewon Kang ,

Maxim Integrated Products' (MXIM) - Get Report quarterly report on Thursday after the market close should serve as a good guide for how other chipmakers will perform this earnings season, according to analysts.

On average, analysts are anticipating Maxim to report 48 cents in earnings per share and $575.48 million of revenue for the quarter. Maxim posted 43 cents of EPS and $582.52 million of revenue during the corresponding period a year ago.

Maxim will serve as a good proxy for the health of other broad-based analog providers including Texas Instruments (TXN) - Get Report , Analog Devices (ADI) - Get Report and Linear Technology (LLTC) , said Drexel Hamilton analyst Cody Acree via phone.

And Silicon Laboratories (SLAB) - Get Report , Intersil (ISIL) and Semtech (SMTC) - Get Report are among smaller analog chip makers for which Maxim could also offer a read-through, according to Acree.

About one-third of all chipmakers are levered to the PC market, another third to smartphones and the remaining third serve broader industries such as industrial and automotive companies. Semis like Intel (INTC) - Get Report fall into the first group while Qualcomm (QCOM) - Get Report belongs to the second category.

The last group, consisting of players like Maxim, has seen stability and improving strength thanks to the global economy picking up.

"With those companies with broad diversity outside smartphones and PCs, demand has been good," Acree said, adding that there's still decent growth in the automotive market.

For Maxim Integrated, such trends should bode well this quarter and beyond. The San Jose, Calif.-based chipmaker's exposure to the more volatile handset market is also largely behind it.

Ahead of its report after the markets close, Maxim shares are up about 0.3% year-to-date. On Thursday morning, its stock was trading down 0.6% to $38.00.

Meanwhile, Maxim is the first to report earnings this season among the broad-based analog segment within the broader semiconductor universe. "Every electronic system has a significant amount of analog content," Acree said.

"While you have Intel that does really good in PC and Qualcomm does really good in smartphones, [analogs] like Maxim and Texas Instruments touch every part of the economy," he said, adding that analog chips are rarely upgraded every single cycle, as smartphone chips are.

Maxim has historically been a bellwether for the broader group, agreed MKM Partners Ian Ing, adding that the chipmaker's results will offer a commentary for the health of Maxim's end markets and the economic implications of Brexit.

Still, Maxim could see its automotive segment dip slightly due to lower demand in Europe, wrote RBC Capital Markets analyst Amit Daryanani in a Wednesday note. Maxim's auto exposure is tied to the European luxury car market and Europe has seen automotive demand slow. Still, Maxim should see growth in the U.S. and China, he added.

"The wild card we suspect could be ramps within communication markets and contribution from data center solutions," Daryanani noted.

In the broader semi universe, smartphones will be a key throughout the second half of the year.

Last year was a big adjustment period for the industry as players came to realize that smartphones weren't going to remain a 15% growth market forever. There have also been concerns about whether Apple (AAPL) - Get Report 's iPhone sales have been slowing, as well as China starting to be dominated by local vendors.

As the chip sector goes into the iPhone-building cycle, the next six months should remain solid for the group as long as there aren't major inventory accesses or economic drama, Drexel Hamilton's Acree said.

Elsewhere in the sector, Intel stock was down nearly 4.6% Thursday morning. The chip giant reported revenue and EPS largely in line with Wall Street's estimates -- $13.5 billion of revenue and 27 cents of EPS vs. consensus of $13.6 billion of revenue and 26 cents of EPS -- but revealed that its growth segments are stalling a bit.

While Intel's PC business wasn't as bad as feared, its data center group (DCG) missed expectations in the second quarter, causing some to wonder whether DCG is becoming a show-me story for investors.

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