Markets

Is a Beat in Store for Qorvo (QRVO) This Earnings Season?

Qorvo IncQRVO is set to release first-quarter fiscal 2019 earnings on Aug 1. Notably, the company beat the Zacks Consensus Estimate in the trailing four quarters with an average positive surprise of 5.13%. The company delivered a positive surprise of 1.9% in last reported quarter.

In the last reported quarter, Qorvo delivered non-GAAP earnings of $1.07 per share, surpassing the Zacks Consensus Estimate by couple of cents. The figure jumped 25.9% from the year-ago quarter.

Revenues on a non-GAAP basis increased 3.5% year over year to $664.4 million. The results reflected an improved demand environment in China. The company benefited from increased demand in the performance-tier for RF Flex and RF Fusion based solutions as well as antenna tuning, discrete components and BAW-based multiplexers.

Guidance & Estimates

For first-quarter fiscal 2019, Qorvo expects revenues between $645 million and $655 million. Earnings are projected to be 75 cents per share at mid-point.

IDP is expected to report strong results in the first quarter. MP revenues are anticipated to increase due to improving China demand.

Qorvo stated that IDP growth prospects are bright due to a diversified product portfolio including solutions for advanced radars and other electronic warfare defense applications, Wi-Fi and connectivity applications and GaAs and GaN products for wireless infrastructure.

The Zacks Consensus Estimate for earnings and revenues is currently pegged at 76 cents and $655.1 million, respectively.

Notably, the stock has returned 22.7% year to date, substantially outperforming 2.7% growth of the industry .

Let's see how things are shaping up for this announcement.

Factors Likely to Impact Q1 Results

Qorvo's IDP segment is benefiting from strong demand for its solutions that are utilized in the Internet of Things (IoT) and 5G end-markets. Notably, IDP revenues grew 26% year over year to $212 million in the last reported quarter.

Qorvo is the only company to support Thread, ZigBee 3.0, ZigBee RF4CE and ZigBee Green Power in a single radio. The company's top-line is likely to gain from the launch of its multi-stack, multi-protocol chip with the HUMAX Chorus Voice Assistant. This will help it advance in the IoT as well as enable integration of voice assistants in a smart home system.

Accelerating timeline for 5G deployment bodes well for Qorvo. The company has participated in dozens of 5G field trials and demonstrations.

Qorvo recently launched the industry's first 28 gigahertz GaN on silicon carbide front end module for base stations. The company also released the industry's first BAW filter to deliver a quadrupling in power handling capabilities for 5G massive-MIMO front end modules.

Further, the company launched five new 5G products. The enhanced 5G infrastructure solutions portfolio now comprises two new integrated front end modules (FEMs) - QPB9329 & QPB9319 - and a wideband driver amplifier - QPA9120. The other two new 2-stage power amplifiers are QPA4501 & QPA3506.

Introduction of the new products strengthens Qorvo's GaN portfolio and provides it a competitive edge in the relevant market. The company's GaN products and the Spatium high-power amplifier family continues to gain traction, which bodes well for top-line growth.

The Zacks Consensus Estimate for IDP is pegged at $194 million, up 16.9% year over year.

This apart, the company recently announced the pricing of $500 million of convertible unsecured senior notes to enhance liquidity. We believe these notes will provide financial flexibility to the company and fuel growth, going forward.

However, customer concentration, particularly from Apple AAPL and Huawei remains a significant headwind for Qorvo.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP . The Sell-rated stocks (Zacks Rank #4 or 5) are best avoided. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Qorvo's combination of a Zacks Rank #3 and an Earnings ESP of +0.44%, makes us reasonably confident of a positive earnings surprise.

Other Stocks to Consider

Here are some better-ranked stocks that you may want to consider as our model shows that these too have the right combination of elements to deliver an earnings beat in their upcoming release.

NMI Holdings Inc NMIH has an Earnings ESP of +1.54% and a Zacks Rank of 1. You can see the complete list of today's Zacks #1 Rank stocks here .

Warrior Met Coal Inc. HCC has an Earnings ESP of +3.17% and a Zacks Rank of 2.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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