Updated from 4:43 p.m. ET with non-GAAP number, latest share price.
NEW YORK (
was weak in extended trading on Tuesday after the Irvine, Calif.-based communications chip maker delivered a lackluster quarter accompanied by a weak revenue outlook.
The company reported net income of $228 million, or 40 cents a share, for the three months ended in March, on revenue of $1.82 billion. The bottom-line performance was up slightly from a year-ago equivalent profit of $220 million, or 40 cents a share, on revenue of $1.46 billion.
Higher expenses sapped profit growth despite the 24% increase in revenue year-over-year as Broadcom's cost of product revenue swelled to $895 million in the latest quarter from $695 million in the same period last year, a jump of roughly 30%. Research and development costs rose to $498 million in the March quarter from $421 million last year.
The average estimate of analysts polled by
was for a profit of 59 cents a share from Broadcom on revenue of $1.81 billion in the March period. The consensus view typically excludes items.
A Broadcom spokesperson put the company's non-GAAP profit for the quarter at 68 cents a share, well ahead of consensus, while
compares a 71 cents a share figure against the 59 cents a share estimate. Despite these indications of a top-line beat, investors sold off in the wake of the report.
The stock was last quoted at $36.97, down 8.5%, on volume of more than 2.3 million, according to
. Based on a regular session close at $40.41, the shares had gained 11.5% in the past year, although they've pulled back 14% since hitting a 52-week high of $47.39 on Jan. 19.
"Broadcom reported solid results for the first quarter, with revenue above the mid-point of guidance and better-than-expected profitability," said Scott McGregor, the president and CEO of Broadcom in a press release.
The forecast for the current fiscal second quarter may be the bigger disappointment as it raises the specter of a slowdown in top-line growth. Broadcom said it sees revenue of $1.75 billion to $1.85 billion for the June-ending quarter. That projection falls short of the average analysts' view for revenue of $1.9 billion in the period.
The company also expects product gross margins for the second quarter to rise 50 basis points on a sequential basis from 48.9% in the first quarter. It sees selling, general and administrative expenses as well as research and development costs coming in flat with first-quarter totals as well.
Wall Street was slightly bullish on Broadcom ahead of the report. Of the 42 analysts covering the stock, 26 rated it at either strong buy (12) or buy (14) with the majority of the remaining 16 at hold (12), rounded out by a small bearish contingent at underperform (3) and sell (1).
The median 12-month price target sits at $49.50, implying upside of nearly 20% from the regular session close. The action in late trades, however, represents a break for the stock below both its 50-day and 200-day moving averages of $39.63 and $42 respectively, so look for analysts to recalibrate their expectations for the shares later this week.
Written by Michael Baron in New York.
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