Broadcom Inc. (AVGO) - Get Report shares traded at an all time high Friday after the Apple Inc. (AAPL) - Get Report and Samsung (SSNLF) chip provider posted stronger than expected first quarter earnings, reiterated its 2019 revenue forecast and said it would return $12 billion to investors in dividends and buybacks this year.
Broadcom said earnings for the three months ending on February 3, the company's fiscal first quarter, came in at $5.55 per share, up 8.4% from the same period last year and well ahead of the Street forecast of $5.22 per share. Group net revenues, Broadcom said, were pegged at $5.789 billion, up 8.7% from the previous year period but just shy of the consensus forecast of $5.82 billion.
Free cash flow grew 39% from last year to more than $2 billion, Broadcom said, and it sees "returning approximately $12 billion to stockholders in fiscal 2019 via a combination of cash dividends and stock buy backs and eliminations, while maintaining our investment grade credit rating."
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"As a result, after a solid start to the year, we are reaffirming our fiscal 2019 revenue guidance of $24.5 billion," CEO Hock Tan told investors on a conference call late Thursday. "Having said that, we expect our semiconductor business to bottom in the second fiscal quarter, driven almost entirely by the seasonal drop in wireless."
"But looking to the second half, we are confident that semiconductor business will resume very meaningful growth," Tan added. "This will be driven by strong product cycles in both wireless and networking, coupled with a recovery in broadband."
Broadcom shares were marked 10.26% higher by mid-day Friday to change hands at a record high $295.73 each, a move that extends the stock's year-to-date advance past 17%.
The group also got a boost from several analyst upgrades, including a 10% price target increase -- to $330 per share -- from Deutsche Bank and a $10 bump from Barclays, to $275, based on an "increasingly attractive" free cash flow story for the San Jose, California-based group. Credit Suisse also lifted its price target by $20 to $320 per share.
Broadcom said gross margins improved by 150 basis points from last quarter to 55.4% of net revenue, and was up more than 6.1% from the same period last year. Operating expenses, however, surged 57% to $2.653 billion.
"Similar to our peers, we see a slowdown in China impacting demand," Tan said Thursday. "However, much of this was factored into our original guidance and we are maintaining our full year fiscal 2019 business outlook."