Broadcom Inc. (NASDAQ: AVGO) will release its fiscal Q3 2021 financial results for the quarter ended July 2021 on September 2, 2021, after market close.
What to look for
Wall Street expects the company to post an increase in profits in Q3 2021 with a significant jump in Q4, which will end in October. Over the past three years, Broadcom has seen its sales rise by a third, with adjusted earnings rising by 50%. This is a massive increase for a company the size of Broadcom, and analysts expect the company to top estimates ahead of the earnings release. In July, the FTC hit the company with an illegal monopolization charge.
The regulator suggests a consent order for settling then charges calling for the company to stop requiring customers to purchase components from it on a near-exclusive or exclusive basis. This is likely to impact sales in the coming quarters.
Earnings: Stockearning’s Estimated EPS for Broadcom's fiscal Q3 2021 is $6.01per share. Historical EPS performance indicates that the company has beaten estimates in 10 (83%) out of the last 12 quarters, missing only twice (16%). In the last quarter, the company's EPS was $5.89, topping estimates of $5.43 per share.
Revenue: The company expects Q3 revenue to be around $6.75 billion, with adjusted EBITDA expected to be around 60% of the projected revenue. However, when the company released its Q2 2021 financial results, it stated that it could not reconcile estimated adjusted EBITDA to predicted revenue with unreasonable effort because actual results may vary. In Q2 2021, the company reported revenue of $6.16 billion, up 15% YoY, and with GAAP net income of $1.493 billion or $3.3 per diluted share.
Stock movement: Broadcom's stock price has gained 7% since the last earnings release. After the earnings release, Broadcom stock has been up 33 times in the previous 46 quarters. Therefore historical price action suggests that there is a 71% chance that the stock will go UP once Broadcom releases Q3 results. According to Stockearning’s algorithm, the predicted first-day move on the stock price after earnings release is 4%, while the predicted move on the seventh day is 5%.
What analysts are saying
JPMorgan analyst Harlan Sur reiterated a “Buy” rating in the stock with a price target of $585 ahead of the anticipated earnings report on September 2, 2021. Sur believes the company’s July quarter free cash flow, earnings, and revenues were better than consensus estimates. He is bullish that the company will give guidance for Q4 2021 above estimates of $7.2 billion. The analyst said that the outlook might be somehow conservative given the current supply constraints.
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