Broadcom (AVGO) to Report Q4 Earnings: What's in the Cards?

Broadcom AVGO is set to report fourth-quarter fiscal 2021 results on Dec 9.

For the quarter, Broadcom expects revenues of $7.35 billion. The Zacks Consensus Estimate for revenues currently stands at $7.35 billion, suggesting growth of 13.7% from the year-ago quarter’s reported figure.

The Zacks Consensus Estimate for earnings has remained steady at $7.75 per share over the past 30 days and indicates 22.1% growth from the figure reported in the year-ago quarter.

Broadcom’s earnings beat the Zacks Consensus Estimate in all of the trailing four quarters, the average earnings surprise being 1.58%.

Broadcom Inc. Price and EPS Surprise

Broadcom Inc. price-eps-surprise | Broadcom Inc. Quote

Let’s see how things have shaped up for Broadcom prior to this announcement:

Factors to Consider

Broadcom’s top-line growth is expected to have benefited from strong demand for its PON fiber in the broadband market, driven by the pandemic-induced work-from-home and online-learning waves. Continued solid demand for DOCSIS 3.1 cable modems has been a key catalyst.

Robust adoption of Wi-Fi 6 and Wi-Fi 6E for access gateways, courtesy of solid demand from homes, enterprises, telcos and other service providers, is expected to have contributed to revenue growth across the broadband end market in the fiscal fourth quarter.

Acceleration in 5G deployment, production ramp up and increase in radio frequency content are expected to have driven top-line growth.

For fiscal fourth quarter, Broadband revenues are expected to have grown in double digits on a year-over-year basis. The company expects strong design win momentum for WiFi 6E in the United States, driven by increased deployment of next-generation last-mile fiber connectivity to homes by service providers like AT&T, British Telecom and Deutsche Telekom.

Management expects wireless revenues to increase 25% on a year-over-year basis. Revenues from resales are expected to register 20% year-over-year growth.

In the networking domain, the company expects revenues to increase in low double digits on a year-over-year basis. Server storage connectivity revenues are expected to be up low double digit year over year.

In the fiscal fourth quarter, Broadcom expects its Semiconductor Solutions business to be up double digits on a year-over-year basis.

The Zacks Consensus Estimate for the Semiconductor solutions segment’s revenues for the fiscal fourth quarter is pegged at $4.86 billion, suggesting growth of 0.6% from the figure reported in the year-ago quarter.

Broadcom’s fiscal fourth-quarter performance is likely to reflect synergies from the buyouts of CA and Symantec’s enterprise security business. The pandemic-induced work-from-home trend may have favored the adoption of cloud-based infrastructure software solutions, which is likely to get reflected in the to-be-reported quarter’s top line.

These factors are anticipated to have aided Broadcom’s Infrastructure software revenues. Revenues from the Infrastructure software segment are expected to increase mid-single digit on a year-over-year basis.

The Zacks Consensus Estimate for the Infrastructure Software segment revenues for fiscal fourth quarter is pegged at $1.70 billion, indicating year-over-year growth of 5.7%.

Broadcom is also benefiting from its partnership with Alphabet's GOOGL Google Cloud.

In April, Broadcom inked a partnership with Alphabet to migrate Google Cloud’s core software solutions to the latter’s cloud environment. With this migration, business enterprises will be able to implement Broadcom’s software solutions like security and DevOps through Google Cloud.

What Our Model Indicates

Per the Zacks model, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here.

Broadcom has an Earnings ESP of 0.00% and a Zacks Rank #2. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks to Consider

Here are a few companies worth considering, as our model shows that these have the right combination of elements to beat on earnings in their upcoming releases:

Costco Wholesale COST has an Earnings ESP of +1.18% and a Zacks Rank #3.

Costco shares have returned 43.9% year to date compared with the Zacks Retail-Discount Stores industry’s growth of 24.4% and the Retail Wholesale Market sector’s decline of 8.5% year to date.

Lululemon athletica LULU has an Earnings ESP of +1.37% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

LULU shares have returned 24.9% year to date compared with the Zacks Textile Apparel industry’s growth of 17.5%. LULU has outperformed the Consumer Discretionary sector’s decline of 11.1% year to date.

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