Stock Buy: Xilinx

Xilinx Inc (XLNX: 26.71 +0.49 +1.87%) should appeal to growth and income investors. The company is expected to generate long-term EPS growth of 14.7%, and it has a dividend yield of 2.4%.

Company Description

Xilinx Inc. designs, develops and markets programmable logic solutions. It offers advanced integrated circuits in the form of programmable logic devices (PLDs).

Business Momentum and Cost Cuts Are Driving Growth

Xilinx's sales growth is coming from the strength in its Virtex-5 family, which is being driven by communications, industrial and data processing. Based on new the company's design win activity, management is confident about the prospects for continued sales growth from the Virtex-5 family.

Moreover, Xilinx recently announced cost-cutting initiatives after completing a strategic assessment of its operations. These cost-cutting efforts should enable the company to expand its profit margins in future quarters.

Recent Results

On January 20, the company had record third-quarter sales of $513.1 million, up 24% from the second quarter and 12% from the year-ago quarter. Xilinx reported earnings per share of $0.40, beating the Zacks Consensus Estimate of $0.35.

Xilinx has beaten the Zacks Consensus Estimate by an average of 12.4% over the last four quarters.

Additionally, the stock has a current dividend yield of 2.4%. Xilinx paid a quarterly dividend of $0.16 per share on March 3.

Xilinx is scheduled to release fiscal fourth quarter 2010 earnings results on April 21.

Updated Guidance

The company recently updated its financial outlook.

Xilinx is now looking for revenue growth of 8%-12% over the next five years. Management also expects a gross margin of 64%-66% and operating margin of 31%-34%. This is up from its previous guidance of 63%-65% for gross margin and more than 30% for operating margin.

Estimates Are Moving Higher

Analysts covering XLNX shares viewed management's guidance as bullish and boosted their estimates for the next two fiscal years.

In the last 30 days, the Zacks Consensus Estimate for fiscal year 2010 has increased by 3 cents to $1.22, while the Zacks Consensus Estimate for fiscal year 2011 estimate has gone up by 4 cents to $1.76.