Skyworks (SWKS) Gearing Up for Q3 Earnings: What's in Store?

Skyworks Solutions, Inc. SWKS is set to release third-quarter fiscal 2020 results on Jul 23.
For third-quarter fiscal 2020, Skyworks expects revenues in the range of $670-$710 million, while non-GAAP adjusted earnings is anticipated to be $1.13 per share.

The Zacks Consensus Estimate for fiscal third-quarter revenues is pegged at $690.1 million, which indicates a decline of 10% from the year-ago quarter’s reported figure.

The consensus mark for earnings has been steady in the past 30 days at $1.13, which suggests a decline of 16.3% from the prior-year quarter’s reported figure.

Notably, the company beat the Zacks Consensus Estimate in three of the trailing four quarters and matched the same once. Skyworks has a trailing four-quarter earnings surprise of 0.98%, on average.

Let’s see how things have shaped up prior to this announcement.

Skyworks Solutions, Inc. Price and EPS Surprise

Skyworks Solutions, Inc. Price and EPS Surprise

Skyworks Solutions, Inc. price-eps-surprise | Skyworks Solutions, Inc. Quote

Factors Likely to Have Influenced Q3

Skyworks’ fiscal third-quarter performance is expected to have benefited from solid adoption of the company’s infrastructure solutions. Notably, Skyworks is enabling 5G massive MIMO and small cell base station roll outs across the United States, Europe and Japan. Additionally, automotive players like Volkswagen, Nissan, Hyundai and Renault are leveraging Skyworks’s solutions to boost connectivity content.

Further, solid uptake of Skyworks’ 5G and Wi-Fi 6 solutions is likely to have led to incremental revenue growth in the to-be-reported quarter. Demand is being driven by increased need for high-speed connectivity amid the COVID-19 induced surge in the remote work, video streaming and web-based learning trends.

Increasing popularity of the company's products instill confidence in the stock. Notably, shares of the company have returned 8.9% in the year-to-date period against the industry’s decline of 3.8%.

Markedly, Skyworks, which carries a Zacks Rank #2 (Buy), is helping set up 5G hotspots in collaboration with Verizon and AT&T. Meanwhile, Wi-Fi 6 is supporting home security application at Honeywell and remote patient monitoring systems at General Electric. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

However, declining trend in smartphone shipments is expected to have been a headwind. Per Gartner data, the global smartphone sales witnessed a decline of 20.2% in the first quarter of 2020 and the downside is likely to have continued due to the impact of the pandemic.

Moreover, rumored delay in the launch of Apple’s AAPL latest iPhone model is likely to have affected Skyworks’ top-line in the quarter under review. Notably, Skyworks supplies radio frequency chips to Apple and derives a significant portion of its revenues from the company.

Nevertheless, the solid traction for Sky5 platform which has been powering smartphone launches at China-based OEMs like Oppo, Xiaomi and Vivo as well as Korea-based player Samsung, is expected to have contributed to fiscal third-quarter revenues.

Moreover, growing momentum for Skyworks’ bulk acoustic wave (BAW) filters is anticipated to have driven top-line growth in the fiscal third quarter. The company has been witnessing significant design wins for BAW-enabled devices. During the lastearnings call management noted that total shipments of BAW-enabled devices have crossed 100 million units.

Yet, growing expenses on product enhancements amid stiff competition from Qorvo QRVO and Broadcom AVGO in the radio frequency semiconductor market is anticipated to have limited margin expansion in the fiscal third quarter.

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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.

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