This semiconductor manufacturer beat estimates for the recent quarter, and appears undervalued at its current price.
Altera Corp (ALTR)
from Argus Weekly Staff Report
Altera Corp (ALTR) reported above-consensus 4Q13 results, reflecting the growing contribution from its newest programmable logic devices (PLDs). Fourth-quarter revenue of $454 million
outpaced the $442 million consensus and the $445 million Argus forecast. More significantly, Altera restored year-over-year top-line momentum in 4Q13 for the first time since 1Q13, following negative revenue comparisons in the middle quarters of 2013. Fourth-quarter GAAP earnings totaled $0.31 per diluted share, a penny better than the consensus forecast and our estimate.
Fourth-quarter earnings were down 17% year-over-year, wrapping up a year in which total revenue fell 3% and EPS declined 22%. However, we believe that negative comparisons are largely in the past, and look for 1Q14 revenue to rise about 8% annually. Although we expect a
negative annual comparison for 1Q14 EPS, we look for positive top- and bottom-line comparisons for the remaining quarters of the year. We are modeling high single-digit revenue growth and low double-digit EPS growth for Altera in 2014.
Based on subsegment exit rates in 4Q13 and early activity in 1Q14, CEO Daane and his team believe that a number of the company’s larger vertical markets are poised for growth in 2014. The CEO particularly pointed to wireless, industrial, military and computer as areas of anticipated growth this year.
Investors remain laser-focused on the opportunity for China 4G LTE. CEO Daane reminded investors that China Mobile alone had increased its base-station deployment plan to 500,000 base stations, from an initially planned 200,000. Altera expects China to deploy its chips in support of its radio and base station buildout over a multiyear time horizon.
We regard ALTR shares as undervalued at current levels, and are reiterating our BUY rating to a 12-month target price of $39.
Jim Kelleher, CFA, Argus Weekly Staff Report, 212-425-7500, www.argusresearch.com, January 27, 2014