Here's What to Expect When Avago Technologies (AVGO) Reports Earnings Thursday

NEW YORK (TheStreet) -- Shares of Avago Technologies  (AVGO) were soaring, up 10.16% to $144.64 on heavy volume in afternoon trading Wednesday, ahead of the smartphone semiconductor company's second quarter earnings release, due out after the market closes Thursday.

Shares of Avago Technologies, which makes chips used in smartphones and supplies parts to Apple (AAPL) for its iPhones, are rallying following reports that the company is in advanced talks to buy Broadcom Corp (BRCM), according to The Wall Street Journal.

As of 3:02 p.m. ET today, Broadcom had a market value of about $32.48 billion. Following the report, shares of Broadcom were surging 19.3% to $55.98 in afternoon trading.

TheStreet's Jim Cramer, Portfolio Manager of the Action Alerts PLUS Charitable Trust Portfolio says he's watching Avago, and calls it the bellwether, the one that will determine how the higher performing chip stocks do. 

For the second quarter ended in April, Wall Street is expecting Avago to report a profit of $2.01 per share on revenue of $1.635 billion, according to analysts surveyed by Thomson Reuters.

In the same quarter of last year, the company earned 85 cents per share on revenue of $701 million.

About 6.12 million shares of Avago have exchanged hands as of 3:02 p.m. ET today, compared to its average daily volume of about 2.11 million shares.

Singapore-based Avago Technologies is a designer, developer and global supplier of a range of analog semiconductor devices with a focus on III-V based products.

The Company serves three primary target markets including wireless communications, wired infrastructure, and industrial.

Separately, TheStreet Ratings team rates AVAGO TECHNOLOGIES LTD as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate AVAGO TECHNOLOGIES LTD (AVGO) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its robust revenue growth, expanding profit margins, good cash flow from operations, increase in net income and solid stock price performance. We feel its strengths outweigh the fact that the company has had somewhat disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • AVGO's very impressive revenue growth greatly exceeded the industry average of 0.5%. Since the same quarter one year prior, revenues leaped by 133.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The gross profit margin for AVAGO TECHNOLOGIES LTD is rather high; currently it is at 61.68%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 21.18% is above that of the industry average.
  • Net operating cash flow has significantly increased by 110.04% to $481.00 million when compared to the same quarter last year. In addition, AVAGO TECHNOLOGIES LTD has also vastly surpassed the industry average cash flow growth rate of 14.73%.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Semiconductors & Semiconductor Equipment industry. The net income increased by 161.9% when compared to the same quarter one year prior, rising from $134.00 million to $351.00 million.
  • Powered by its strong earnings growth of 130.18% and other important driving factors, this stock has surged by 89.43% over the past year, outperforming the rise in the S&P 500 Index during the same period. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • You can view the full analysis from the report here: AVGO Ratings Report

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