The Zacks Analyst Blog Highlights: Broadcom Corporation, SAP AG, General Dynamics Corporation, Buffalo Wild Wings Inc. and Whirlpool

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Oct 28, 2010, 08:01 ET

CHICAGO, Oct. 28 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Broadcom Corporation (BRCM), SAP AG (SAP), General Dynamics Corporation (GD), Buffalo Wild Wings Inc. (BWLD) and Whirlpool Corporation (WHR).

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Here are highlights from Thursday's Analyst Blog:

Broadcom Beats Expectations

Leading chipmaker Broadcom Corporation (BRCM) reported solid results for the third quarter of 2010, which beat both management and the Zacks estimates.

Broadcom generated revenues of $1.806 billion in the third quarter of 2010, up 44% year over year and up 12.6% sequentially. The results surpassed management's revenue guidance of $1.7 – $1.8 billion and the Zacks Consensus Estimate of $1.749 billion.

The sequential growth in the quarter was propelled by strength in Mobile and Wireless and Broadband businesses, which were up 27% and 6%, respectively.

Guidance

Going forward, Broadcom expects net revenue in the fourth quarter to be flat to up $100 million sequentially to $1.8 billion – $1.9 billion, much better than the Zacks Consensus Estimate of $1.0 billion.

Broadcom continues to invest in the DTV business and sampled its first 40-nanometer DTV part to multiple customers with production shipments expected by year-end. Broadcom expects revenue growth to continue in the December quarter, driven by new product cycles and increases in the adoption of high-definition pay TV services and content across the globe.

Based on customers' order plans and solid traction and new product ramps, Broadcom expects healthy growth in the fourth quarter from its Wireless Connectivity business and a substantial increase in sales from cellular solutions (Apple's iPad in particular). Revenues from wireless connectivity devices are projected to grow phenomenally driven by strong demand for smartphones, tablets, netbooks and digital TVs.

End-market-wise, Broadcom expects the Broadband segment to record modest growth sequentially in the fourth quarter. Mobile and Wireless segment is expected to be up on a sequential basis but revenues from Infrastructure Networking should be roughly flat.

SAP Slips and Falls

SAP AG (SAP) released its earnings results for third quarter 2010, reporting earnings per share of euro 0.42 or 54 cents. The company's earnings for the quarter missed the Zacks Consensus Estimate of 67 cents by 20%.

Revenue

SAP AG reported total revenues of euro 3 billion or $3.87 billion, above the Zacks Consensus Estimate of $3.81 billion. The revenues in the quarter increased by 13% at constant currency, led by strong growth in software revenue, support revenue and double digit growth in subscription revenue. The company recorded double-digit growth in software and software related service revenue and the contribution of Sybase. Strategic markets, like the US, also provided substantially good revenue growth for the company of 27% at constant currencies.

Software and software-related revenue increased by 20% year over year to euro 2.32 billion. Excluding currency effects, software and software-related revenue increased by 13%.

Software revenue for the period was euro 656 million, an increase of 25%. Excluding currency effects, software revenue increased by 15%.

Outlook

SAP AG expects full-year 2010 non-IFRS software and software-related service revenue to increase in a range of 9% – 11% at constant currencies. SAP's business, excluding the contribution from Sybase, is expected to contribute 6 – 8 percentage points to growth.

The company projects an effective tax rate of 27.5% – 28.5% for 2010.

We currently have an Outperform recommendation on SAP AG.

General Dynamics Tops, Ups Outlook

Defense and aerospace operator General Dynamics Corporation (GD) announced its third-quarter 2010 operating earnings of $1.70 per share, which surpassed the Zacks Consensus Estimate of $1.64. The results of the company were 22 cents ahead of the year-ago figure of $1.48 per share.

The GAAP earnings of the company during the quarter were $1.70 per share versus $1.47 per share reported in the third quarter of 2009.

Guidance

General Dynamics raised its full-year operating earnings for 2010 to the range of $6.70 to $6.75 per share from $6.60 to $6.65, taking into consideration the robust performance during the quarter under review.

Outlook

In the reported quarter, the company won contracts worth $1.67 billion, out which some significant ones are a contract for Stryker wheeled armored vehicle program, agreement with NASA to modernize the ground segment of the satellite communications network, and a deal with the U.S. Navy for the long-lead material and advanced design efforts for the Mobile Landing Platform program.

Total backlog of General Dynamics at the end of the quarter under review was $61.83 billion, which slipped 6.7% from $66.3 million reported in the year-ago comparable quarter. However, funded backlog, as a percentage of total backlog, at the end of the quarter increased 310 basis points year over year.

We believe the company will be able to meet the new earnings expectation for 2010, as it is backed up by ramping backlog and consistent contract wins. All the segments of the company barring Combat Systems performed well during the reported quarter, which will also add to the ability of the company to achieve its earnings target.

Buffalo Wild Wings Beats, Shares Fall

Buffalo Wild Wings Inc.'s (BWLD) third quarter 2010 earnings of 47 cents per share outdid the Zacks Consensus Estimate of 43 cents and soared 23.7% from 38 cents posted in the prior-year quarter. The better-than-expected results were driven by double-digit growth in the top line and lower chicken wing prices.

Total revenue climbed 14.0% year over year to $151.3 million and also outperformed the Zacks Consensus Estimate of $150.0 million. Sales at company-operated restaurants rose 13.9% to $137.0 million, fueled by 24 additional restaurants in operation at the end of the quarter compared with the prior-year quarter and a rise in same-store sales.

Franchise royalties and fees grew 15.6% year over year to $14.4 million, propelled by 57 additional restaurants in operation at the end of the quarter compared with the year-ago quarter and an improvement in same-store sales. After experiencing a drop in its comparable-store sales in the last quarter, same store sales increased 2.6% and 0.3% at company-operated restaurants and franchised restaurants, respectively.

Average weekly sales for company-operated restaurants increased 4.2% from the prior-year quarter to $44,394 and for franchised restaurants, it inched up 1.1% to $49,005.

Based in Minneapolis, Minnesota, the company's restaurant operating margin perked up 110 basis points (bps) to 18.1%, aided by a 190 bps contraction in cost of sales to 27.9% due to an 11% fall in cost of traditional wings and a 20 bps decrease in occupancy costs to 6.7%, partially offset by a 50 bps expansion in labor costs to 30.7% and rise of 60 bps in operating costs to 16.7%.

During the quarter, Buffalo Wild Wings opened 10 company-owned restaurants and 10 franchise restaurants.

Whirlpool Just Meets Expectations

Whirlpool Corporation (WHR) reported a profit (before special items) of $2.22 per share that was in line with the Zacks Consensus Estimate. The profit improved from $1.67 per share (before special items) in the year-ago quarter.

Revenues in the quarter increased marginally by $22 million to $4.52 billion, meeting the Zacks Consensus Estimate. The adjusted operating profit was $234 million in comparison to $193 million in the previous year.

The company's results were driven favorably by cost reduction and efforts to enhance productivity, as well as increased monetization of certain tax credits. However, the benefits were offset partially by higher material costs and unfavorable product price/mix.

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