A month has gone by since the last earnings report for Marvell Technology Group Ltd. MRVL. Shares have lost about 6% in that time frame.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? 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.
Marvell Technology Beats on Q3 Earnings and Revenues
Marvell Technology Group Ltd. reported better-than-expected third-quarter fiscal 2018 (ended Oct 28, 2017) results.
The company reported non-GAAP earnings (excluding stock-based compensation and all one-time items) of 34 cents per share, outpacing the Zacks Consensus Estimate by a penny. Reported earnings were far better than the year-ago figure of 21 cents.
Quarter Details
Although Marvell’s revenues declined 1.2% year over year to $616.3 million, it surpassed the Zacks Consensus Estimate of $613 million. Moreover, reported revenues came ahead of the mid-point of management guided range of $595-$625 million (mid-point $610 million).
At the end markets, storage revenues (51% of total revenues) decreased 4% year over year. However, the same increased 1% sequentially on better-than-expected demand at the SSD (Solid-State Drive) segments along with increased demand from enterprise.
The networking business (24%) increased 3% year over year and 2% sequentially mainly due to increase in the network of processor product line.
Revenues from connectivity (17%) increased 19% year over year and 4% sequentially, primarily driven by wins in gaming and home media streaming applications. Other product (8%) revenues during the quarter declined 22% year over year.
Marvell’s non-GAAP gross profit came in at $379.5 million, up 5.7% on a year-over-year basis. Gross margin also increased from 57.2% to 61.3% on a year-over-year basis, primarily buoyed by a favorable product mix and higher revenue base.
Non-GAAP operating expenses decreased 13.8% year over year to $204.5 million. As a percentage of revenues operating expenses contracted 480 basis points to 33.2%. Marvell’s non-GAAP operating margins came in at 28.4% compared with 19.5% reported in the year-ago quarter. The results were positively impacted by lower operating expenses as a percentage of revenues.
The company reported non-GAAP net income (excluding stock-based compensation and all one-time items) of approximately $171.8 million during the quarter as compared with $111.9 million reported in the year-ago quarter.
Marvell exited the quarter with cash, cash equivalents and short-term investments of $1.732 billion as compared with $1.574 billion in the previous quarter. The company carries no long-term debt. Cash from operating activities during the quarter amounted to $216.2 million.
During the quarter, Marvell paid $30 million as dividend to its shareholders and repurchased $140 million worth of shares.
Outlook
Marvell anticipates fourth-quarter 2018 revenues in the range of $595-$625 million (mid-point $610 million).
Management expects non-GAAP gross margin to be approximately 62%, while non-GAAP operating expenses are expected to be roughly between $215 million and $220 million. The company anticipates non-GAAP earnings per share in the band of 29-33 cents (mid-point 31 cents).