Zacks_Analysts' Blog : Altera Beats by a Penny - Analyst Blog

Altera Corp. (ALTR) reported its fourth quarter 2010 diluted earnings per share of 72 cents, a penny more than Zacks Consensus Estimate of 71 cents per share and increased 111.8% from the year-ago quarter. The reported earnings also compared favorably with the earlier quarter by 4.3%.

Quarter In Detail

Total revenue of $555.4 million not only surpassed the Zacks Consensus Estimate of $548 million, but also increased 5.0% sequentially and 52.0% from the year ago quarter. There was a sequential rise of 26.0% and 175.0% year over year growth in the sales of new product category.

Gross profit increased 6.6% sequentially and 57.8% from the prior-year quarter to $394.1 million. Gross profit margins increased 0.9 percentage points sequentially and 2.6 percentage points from the year-ago quarter to 71.0%.

Operating profit increased 10.5% sequentially and 120.4% from the year ago quarter to $263.2 million. Operating profit margins increased 2.2 percentage points sequentially and 14.7 percentage points year on year to 47.4%.

As on December 31, 2010, cash flow from operating activities was $856.7 million. Altera ended the quarter with $2.8 billion in cash and short-term investments.

The company declared a quarterly cash dividend of 6 cents per share payable on March 1, 2011 to stock holders of record on February 10, 2011.

Quarter Ahead

For the forthcoming quarter the company expects sequential sales growth to be down between 1.0% and 5.0%. Gross margin is expected to be in the range of 71.0% to 72.0%. While the expenses in the field of research and development is expected to be in the range of $76.0 million to $77.0 million.

The company expects to maintain the SG&A expenses in between $69.0 million to $70.0 million. Tax rate for the fourth quarter is expected to be in the range of 10.0% and 12.0%.

Conclusion

Analyst estimates remained unchanged in the run up to the earnings release. The average estimate was 71 cents when the company reported earnings. We note that Altera Corp. has consistently exceeded estimates over the past year or so. The average surprise in the preceding 4 quarters is a positive 14.46%, and another positive surprise was therefore expected.

Altera Corp. faces competition from Xilinx Inc. (XLNX) and Lattice Semiconductor Corporation (LSCC).

We currently have Zacks #3 Rank for Altera Corp. which translates to a Hold rating on a short-term basis. For the long term we recommend a Neutral rating.