A month has gone by since the last earnings report for Linear Technology Corporation LLTC. Shares have added about 3.5% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Linear Technology (LLTC) Beats on Q2 Earnings, Revenues
Linear Technology Corp. reported second-quarter fiscal 2017 earnings of 54 cents, which exceeded the Zacks Consensus Estimate by a penny. Earnings increased 1.60% sequentially and 8.8% year over year.
In Jul 2016, Linear announced that Analog Devices, Inc. agreed to acquire its business in a cash and stock deal worth $30 billion. Per the agreement, Linear shareholders will receive $46.00 in cash for each share and an additional 0.2321 of Analog Devices’ common stock for each Linear share.
The deal is expected to be completed by the end of the first half of calendar year 2017.
The acquisition is expected to be accretive to non-GAAP earnings and cash flow going forward. Also, Linear expects to realize $150 million in annual cost synergies in the first 18 months following the closure. The merger of these two companies will create an analog industry leader across a huge range of products, customer breadth and scale. The deal will expand Analog Devices’ total addressable market to $14 billion from $8 billion, allowing it to tap the phenomenal demand in some of the most attractive markets, namely industrial, automotive and communications infrastructure markets.
A quick look at the numbers:
Revenues
Linear reported revenues of $375.8 million, up 8.3% year over year and 0.5% sequentially. The figures were slightly above the Zacks Consensus Estimate of $374.0 million. The increase in revenue was driven by strong growth in the company’s Communication and Industrial markets.
Margins
Pro forma gross margin was 76.3%, up 35 basis points (bps) sequentially and 63 bps year over year, driven by a richer product mix.
Operating expenses of $113.8 million increased 0.7% sequentially and 0.4% year over year. As a percentage of sales, research & development remained the same while selling, general & administrative expenses decreased from the year-ago quarter. As a result, operating margin of 45.5% was up 30 bps sequentially and 246 bps year over year.