Linear Sets Tone For Semiconductor Stock Earnings (LLTC, MXIM, SMH)

Linear Technology Corp. (NASDAQ: LLTC) is actually the first of the real semiconductor sector stocks to report earnings this January for the quarter-end of December 2009.  The maker of linear integrated circuits reported earnings of $0.33 EPS on revenues of $256.4 million. Thomson Reuters had estimates pegged at $0.31 EPS and $247.05 million for revenues.  For the coming quarter, Linear’s strong second quarter bookings and a positive book-to-bill ratio has allowed the company to guide revenues up by 7% to 10% on a sequential basis.  That would translate to revenues of $274.3 to $282 million versus a Thomson Reuters consensus estimate of $257.55 million in revenues.  Where this gets interesting is how this plays into the related shares.

No earnings guidance was offered, but the consensus estimate for next quarter is $0.33 EPS.  As far as how this compares in the rear view mirror, this represents 9% sequential growth in revenues and s 3% growth year over year.  The earnings of $0.33 EPS is six-cents higher sequentially but five-cents lower on a year over year basis.

The quotes from the company continue to give high marks.  The company saw higher gross margins and tight cost controls taking its operating margin to 45.1% of sales, up from 42.2% last quarter.  The company added $33.0 million cash in the quarter to have a cash and cash equivalents balance of $942.5 million.  As a result, Linear is boosting its dividend by a penny to $0.23 per share per quarter.   Based upon today’s closing price of $30.23 that will give the stock a 3% effective yield on its dividend.

Linear closed down 1.3% at $30.23 today, versus a 52-week range of $20.26 to $31.21.  Shares are up 2.5% at $30.90 in the after-hours session.  Maxim Integrated Products Inc. (NASDAQ: MXIM) is considered as the ‘pairs trade’ stock against Linear, and it closed down 4% at $19.02 in Tuesday’s trading. Maxim does not report until January 28, 2010 after the closing bell.  Linear may not be large enough to run the entire chip sector, but it does represent about 5.3% of the Semiconductor HOLDRs (NYSE: SMH).

JON C. OGG