Looking Beyond Cirrus Logic's Earnings
Harsh is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Yesterday was a fantastic day for denizens of the iEmpire. After the world’s largest company blew away the Street, it was time for those who depend on its spoils to make some merry. And out of all the partygoers who were celebrating Cupertino’s success, audio codecs supplier Cirrus Logic (NASDAQ: CRUS) was shining the brightest.
Cirrus’ stock soared 11% yesterday. But the good times continued after the company released its fourth quarter results. Its shares spiked another 8% almost, resulting in total gains of almost 20%. So what was it that drove Cirrus to such heights yesterday? The answer would be its relationship with Apple (NASDAQ: AAPL), without any doubt.
Tagging along with Apple
Apple is Cirrus’ largest customer. As a result, I was expecting Cirrus to deliver an impressive quarter after its client saw its revenue soar some 59% just a day before. And I should say that Cirrus didn’t disappoint by posting revenue of $110.6 million in the quarter, a jump of 21% from last year and marginally ahead of analyst estimates of $110.1 million. It is pretty clear that the 11.8 million iPads and 35 million iPhones that Apple sold in the previous quarter quarterbacked Cirrus’ top line surge.
Moreover, the company managed to display more efficiency in the quarter as it pushed up its gross margin to 56% from 50% in the year ago period. Also, Cirrus’ adjusted earnings per share increased to $0.36 in the quarter from $0.22 last year. So all in all, it was an impressive performance from Cirrus right from the top line to the bottom line.
The year ahead
More importantly, one can expect Cirrus to keep up the pace as the year goes on. While the guidance issued for the ongoing quarter isn’t quite stellar, the exciting developments in the latter half of the year would probably more than make up for it. Management says that it expects the top line to improve significantly this year. Well, not surprising when the much-anticipated next version of the iPhone is touted for release in the fall.
In addition, CEO Jason Rhode says that Cirrus is going to see a ramp up in products in the second half of the year. The company has entered into an unsecured $100 million revolving credit arrangement in order to support the product introductions. These developments, and management’s comments that they expect “transition to a sharply higher level of revenue beginning in the September quarter,” lead me to think that Cirrus is making preparations for the next iPhone production ramp up.
The bottom line
In a previous piece, I had focused upon Cirrus’ relationship with Apple and how it has grown since it first found a spot in the iPhone 3GS. Cirrus’ performance in the just-concluded quarter reaffirms my belief in the stock. And finally, with the next iPhone in sight, one can expect Cirrus to deliver a bright year ahead.
TechJunk13 has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple, and Cirrus Logic. Motley Fool newsletter services recommend Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.