Marvell Technology (MRVL) Up 4.3% Since Earnings Report: Can It Continue?

A month has gone by since the last earnings report for Marvell Technology Group Ltd. (NASDAQ:MRVL) . Shares have added about 4.3% in that time frame, outperforming the market.

Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Marvell Technology Beats on Q1 Earnings and Revenues

Marvell Technology reported better-than-expected first-quarter fiscal 2018 (ended Apr 29, 2017) results.

The company reported adjusted earnings (including stock-based compensation but excluding all one-time items) of $0.20 per share, which outpaced the Zacks Consensus Estimate of $0.16 per share. Reported earnings were far better than the year-ago loss of $0.04 per share.

Quarter Details

Marvell’s revenues grew 11.5% year over year to $579.2 million. The reported figure beat the Zacks Consensus Estimate of $570 million. The year-over-year increase was mainly due to growth in storage, networking and connectivity business.

At the end markets, storage revenues increased 25% year over year on better-than-expected demand at the HDD (Hard-Disk Drive) and SSD (Solid-State Drive) segments along with increased demand from enterprise and data center market.

The networking business increased 5% year over year due to demand in the enterprise networking business.

Revenues from connectivity increased 3% year over year primarily driven by wins in gaming and home media streaming applications. Other product revenues during the quarter declined 16% year over year.

Marvell’s adjusted gross profit came in at $348.6 million, up 26.8% on a year-over-year basis. Gross margin also increased from 52.9% to 60.2% on a year-over-year basis, primarily buoyed by a favorable product mix and higher revenue base.

Adjusted operating expenses were down 14.7% year over year to $244.9 million. Marvell’s adjusted operating income came in at $103.8 million as compared with a loss of $12.1 million reported in the year-ago period. The results were positively impacted by lower operating expenses as a percentage of revenues.

The company reported adjusted net income (including stock-based compensation but excluding all one-time items) of approximately $101.9 million during the quarter.

GAAP net income for the quarter came in at $96.9 million as against net loss of $13.3 million reported in the year-ago quarter.

Marvell exited the quarter with cash, cash equivalents and short-term investments of $1.649 billion as compared to $1.668 billion in the previous quarter. Cash from operating activities during the quarter amounted to $135.1 million. The company carries no long-term debt.

During the quarter, Marvell paid $30 million as dividend to its shareholders and repurchased $166 million worth of shares.

Outlook

Marvell expects second-quarter fiscal 2018 revenues in the range of $585 to $615 million.

Management expects non-GAAP gross margin at around 61%, while non-GAAP operating expenses are expected to be roughly between $215 million to $220 million. The company expects non-GAAP earnings per share in the band of $0.26 per share to $0.30 per share.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last one month period as none of them issued any earnings estimate revisions.

Marvell Technology Group Ltd. Price and Consensus

Marvell Technology Group Ltd. Price and Consensus | Marvell Technology Group Ltd. Quote

VGM Scores

At this time, the stock has a poor Growth Score of 'F', a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of 'D' on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of 'F'. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate investors will probably be better served looking elsewhere.

Outlook

The stock has a Zacks Rank #1 (Strong Buy). We are expecting an above average return from the stock in the next few months.