MKM Previews Semiconductor Earnings. What Do You Expect?

In a report published Monday, MKM Partners analyst Ian Ing gave readers an earnings preview of the semiconductor industry. with many of the sector's top firms slated to report this week. Below is a summary of his positions on three of the big players.

• Analog Devices, Inc. (NASDAQ: ADI): Maintained Neutral rating, lowered price target from $61 to $58. EPS estimate of $2.91.
• Semtech Corporation(NASDAQ: SMTC): Maintained Buy rating, lowered price target from $32 to $28. EPS estimate of $1.15.
• Marvell Technology Group, Ltd. (NASDAQ: MRVL): Maintained Buy rating, maintained price target at $61. EPS estimate of $0.78.

Analog Devices

Ing admitted that he was "most cautious" ahead of Analog's earnings report. Although the "widely expected AAPL Force Touch win" seems like a promising boost, he believes that the markets have already priced in the value of that contract.

Meanwhile, he suggested that disappointment could potentially stem from "unfavorable gross margin mix" and factory utilization declines.

Semtech

Ing highlighted several positive signs for Semtech. He noted that the company's recent 8 percent payroll reduction would lead to an estimated $20 million in annual savings. He also mentioned that exposure to Samsung has declined recently -- down to 8 percent of April sales. Semtech also has several upcoming product cycle launches, which should provide upside.

Nevertheless, there are also several risks. Ing said the company's small-cap structure makes it especially sensitive to revenue pressures. Its "weakness across all Android tiers" was another concern.

Still, the analyst maintained that "its robust design win pipeline should begin to drive outperformance."

Marvell

Ing held his EPS estimates for Marvell underneath the Street consensus, citing headwinds in the firm's major markets. Still, he thinks that the company would be relatively insulated from low guidance.

Ing is looking for the stock to trade higher after the conference call as several key overhangs, including litigation costs and soft demand of Marvell's storage products, could potentially be removed.

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