Amkor Technology, Inc.AMKR reported third-quarter 2018 adjusted earnings of 24 cents per share, surpassing the Zacks Consensus Estimate by 6 cents. Moreover, earnings were up 71.4% sequentially and 4.3% year over year.
Also, revenues of $1.144 billion surpassed the Zacks Consensus Estimate by 0.41% and were within the company's guided range of $1.10-$1.18.
However, its shares have lost 40% on a year-to-date basis, underperforming the industry 's decline of 12.6%.
The company has been making efforts to channelize its resources in important growth areas like MEMS and sensors business, which focuses on mobile and automotive applications.
The company remains optimistic about growth in the automotive business. Per market forecast, the automotive market will grow in high single digits in the coming years. The growth is expected to be driven by increasing electronic content. Given its attractive value proposition for automotive customers, the company is poised to benefit going ahead.
In addition, management expects 5G to act as a major catalyst in the smartphone market, and also anticipates incremental opportunity for Amkor Technology in this large market.
Revenues of $1.14 billion increased 7.3% sequentially but decreased 0.4% year over year. The increase was driven by particular strength in mobile communications. The communications segment benefited from iOS ecosystem customers' incremental demand.
Also, strong demand for advanced system-in-package (SiP) and automotive strength aided revenue growth.
Revenues by Product Lines
The revenue mix in terms of product lines is discussed below.
Advanced Products include flip chip scale packages, wafer-level chip scale packages and flip chip ball grid array packages. It accounted for approximately 51% of third-quarter revenues. Revenues increased 17.3% sequentially and 3.4% year over year.
Mainstream Products include lead frame packages, substrate-based wire bond packages and MEMS packages. It accounted for the remaining 49% of third-quarter revenues. Revenues decreased 1.4% sequentially and 4.1% year over year.
Per the press release, gross margin was 17.5%, up 160 basis points (bps) sequentially but down 200 bps from the year-ago quarter. The sequential increase was backed by higher revenues.
Operating expenses of $108 million decreased 8.8% year over year. As a percentage of sales, both selling, general and administrative, as well as research and development expenses decreased.
As a result, reported operating margin was 8%, up 300 bps from the prior-year quarter.
Balance Sheet & Cash Flow
Total cash, cash equivalents and restricted cash were $550.2 million in the third quarter, up from $382.3 million in the last reported quarter. Long-term debt in the quarter was $1.27 billion.
During the third quarter, cash flow from operations was $427.2 million. Capex was $478 million compared with $669 million in the second quarter.
For the fourth quarter, Amkor Technology expects revenues in the range of $1.02-$1.10 billion. The Zacks Consensus Estimate is pegged at $1.12 billion. Gross margin is expected within 13-15%. Earnings per share are expected in the range of 2-14 cents on a GAAP basis.
Amkor Technology, Inc. Price, Consensus and EPS Surprise
Zacks Rank and Stocks to Consider
Currently, Amkor Technology carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader technology sector are Expedia EXPE , IAC/InterActiveCorp IAC and AMETEK, Inc. AME , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Long-term earnings growth rate for Expedia, IAC/InterActiveCorp and AMETEK is currently pegged at 16.1%, 15% and 10.97%, respectively.
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