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Amkor (AMKR) Q3 Earnings Beat Estimates, Revenues Rise Y/Y

Amkor Technology, Inc. AMKR reported third-quarter 2020 earnings of 38 cents per share, beating the Zacks Consensus Estimate by 46.1%. The figure improved 65.2% from both the year-ago quarter and the previous quarter.

Revenues of $1.35 billion surpassed the Zacks Consensus Estimate by 8.3%. The figure improved 25% year over year and 15.4% sequentially.

Top-line growth was driven by solid demand in the overall automotive, communications and industrial end-markets during the reported quarter.

However, the slow recovery in the automotive market of Japan was concerning.

Further, uncertainties related to the coronavirus pandemic remain headwinds for the company.

Shares of Amkor have lost 12.7% on a year-to-date basis against the industry’s gain of 28.7%.

 


 

 

Nevertheless, the company’s strengthening momentum across 5G, advanced automotive systems, IoT wearables and high-performance computing on the heels of its robust advanced packaging technologies is likely to drive its financial performance in the days ahead.

Further, the company’s focus toward shareholders’ returns is expected to help the stock rebound in the near term. Notably, Amkor has initiated a regular quarterly cash dividend of 4 cents per share

Revenues in Terms of Product Lines

Advanced Products — which includes flip chip scale packages, wafer-level chip scale packages and flip chip ball grid array packages — accounted for 66.4% of third-quarter revenues. Revenues improved 52.6% year over year to $899 million.

Mainstream Products — which includes lead frame packages, substrate-based wire bond packages, and MEMS packages — accounted for the remaining 33.6% of third-quarter revenues. Revenues declined 8.1% year over year to $455 million.

End-Market Details

Communications: The company generated 43% of its total revenues from this market. The top line in this market grew 30% year over year, owing to the launch of next-generation premium smartphones and the strong position of Amkor in the mobile market.

Consumer: 25% of the company’s revenues were generated from this market during the reported quarter. Further, revenues from this market went up 70% from the year-ago quarter. The company continued to capitalize on the prospects present in the consumer IoT space on the back of its strong investments in capacity and technology.

Automotive, Industrial & Other: 17%of the company’s revenues were generated from this market in the third quarter. Amkor delivered a better-than-expected performance in this market, owing to improved demand for advanced products. Further, ramping up customer orders was a major positive.

Computing: The company generated 15% of its total revenues from this market. The top line in this market grew 21% year over year, owing to strengthening momentum across data center, infrastructure, storage and personal computing applications.

Amkor Technology, Inc. Price, Consensus and EPS Surprise

 

Amkor Technology, Inc. Price, Consensus and EPS Surprise

Amkor Technology, Inc. price-consensus-eps-surprise-chart | Amkor Technology, Inc. Quote

Operating Details

Per management, gross margin of 17.8% expanded 100 basis points (bps) from the year-ago quarter.

Operating expenses of $113.6 million increased 9.9% year over year. As a percentage of revenues, the figure contracted 110 bps year over year.

Operating margin was 9.4%, which expanded 210 bps from the prior-year quarter.

Balance Sheet

As of Sep 30, 2020, cash and short-term investments were $922.9 million compared with $1.1 billion as ofJun 30, 2020.

Further, total debt was $1.3 billion at the end of the third quarter, down from $1.5 billion at the end of the second quarter. Net debt was $396 million in the reported quarter versus $451 million in the prior quarter.

Guidance

For fourth-quarter 2020, Amkor expects revenues of $1.25-$1.35 billion. The Zacks Consensus Estimate for revenues is pegged at $1.23 billion. The increase is likely to be driven by the launch of flagship smartphones, including more 5G models.

Gross margin is expected to be 17-20%.

Further, earnings are expected to be28-47 cents per share. The Zacks Consensus Estimate for earnings is pegged at 24 cents.

Zacks Rank & Stocks to Consider

Amkor currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector are Fortinet FTNT, CDW Corporation CDW and Qorvo QRVO. All three companies carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term earnings growth rate of Fortinet, CDW and Qorvo is pegged at 14%, 13.1% and 12.35%, respectively.

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