Broadcom's Confusing Earnings Meet Higher Dividend & Buyback (BRCM, QCOM)

Broadcom Corporation (NASDAQ: BRCM) has come out with its fourth quarter earnings.  It has also hiked its dividend and  accelerated its share buyback plan.

The maker of communications chips reported earnings came to $266.2 million or $0.47 EPS on a GAAP basis that includes $0.11 of non-recurring settlement and asset impairment charges).  We have tallied non-GAAP earnings at $0.75 EPS for an apples-to-analysts comparison. Revenue was $1.9455 billion.  That revenue figure does include some $51.6 million in revenues from under a QUALCOM Inc. (NASDAQ: QCOM) agreement, and some analysts might not want to count that as operating revenues.  Cash flow from operations was $452 million; operating margin was 13.8% and operating margin was put at 50.9%.  Thomson Reuters had estimates of $0.74 EPS non-GAAP and $1.9 billion in revenues.

As for guidance, Broadcom sees $1.75 to $1.85 billion in next quarter sales with gross margins flat.  It also sees 585 million to 590 million shares outstanding at the end of the next quarter.  Thomson Reuters has estimates of $1.8 billion for the current quarter guidance.

Broadcom plans to keep trying to return capital to holders and still have flexibility for growth.  It is hiking its prior $0.08 dividend by 12.5% to $0.09 per quarter.  In addition, it is implementing a $300 million accelerated share buyback plan under its “existing evergreen share repurchase program.”

All in all, this was a very confusing report considering how much data had to be accounted for in the earnings.  More importantly, the difference here in GAAP earnings of $0.47 EPS and non-GAAP earnings of $0.75 EPS is something that the company really better address on its conference call.  Otherwise, American investors might begin to think that they are investing in fake numbers against reality.

Shares of Broadcom closed up 2.8% at $46.39 today in regular trading and the after-hours confusion about its earnings (without stock-based compensation costs) had shares down over 2% shortly after the report.  Shares are down 1.2% at $45.80 in the after-hours session.

JON C. OGG