Why Is Skyworks (SWKS) Down 24.8% Since Last Earnings Report?
A month has gone by since the last earnings report for Skyworks Solutions (SWKS). Shares have lost about 24.8% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Skyworks due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Skyworks Q2 Earnings Beat, Revenues Miss Estimates
Skyworks delivered second-quarter fiscal 2019 non-GAAP earnings of $1.47 per share, beating the Zacks Consensus Estimate of $1.43 per share. The bottom line also came ahead of management’s guidance of $1.43 per share at mid-point. However, the figure decreased 10.4% from the year-ago quarter.
Revenues of $810.4 million were down 11.3% year over year, primarily owing to decline across mobile business and softness in the Chinese markets.
Further, the top line missed the Zacks Consensus Estimate of $821 million. The figure came within management’s guidance of $800 million to $820 million.
During the second quarter, Skyworks launched Sky5 Ultra and Sky5 LiTE for cellular applications. The company also introduced its latest suite of mini circulators for 5G infrastructure.
The suite comprises SKYFR-001692 SKYFR-001657 circulators designed for wireless infrastructure and offers network attached device (NAD) reliability, and sturdy LTE connectivity with high bandwidth and low latency features.
Additionally, the company powered Google’s Pixel with multimode, multiband front-ends. The company also unveiled SkyOne and DRx technology for Samsung’s Galaxy smartphones.
The company also deployed 5G base station solutions for leading European infrastructure providers. Introduced C-band filters to strengthen foothold in aerospace and defense markets.
Further, the company joined hands with Ericsson and Nokia to secure 5G massive MIMO infrastructure wins.
The company’s Avnera Corporation acquisition is also noteworthy. The buyout gives Skyworks access to robust analog/mixed signal voice, audio and speech processing engines.
Skyworks is benefiting from strong demand of its wireless communications engines. The company’s expanding product portfolio, growing clout in the IoT solutions and 5G markets are key catalysts.
Non-GAAP gross margin remained flat on a year-over-year basis to 50.7%.
Non-GAAP operating expenses during the reported quarter came in at $135 million or 16.7% of total revenues, in line with management’s guided range of $135 million.
As a result, non-GAAP operating margin contracted 220 bps on a year-over-year basis to 34.1% in the reported quarter.
Balance Sheet & Cash Flow
As of Mar 29, 2019, cash & cash equivalents were $991.3 million, down from $1.10 billion reported in the previous quarter.
Cash flow from operating activities was $192.1 million, down from $549 million in the previous quarter. Capital expenditure was $96.7 million in the quarter under review.
The company declared a quarterly dividend of 38 cents per share, payable on Jun 11, 2019. Skyworks repurchased 1.7 million shares for a total of $142 million.
For third-quarter fiscal 2019, revenues are expected to be in the range of $815 million to $835 million.
Gross margin is expected in to be in the range of 50.5-51%. Operating expenses are projected to be roughly $137 million.
Non-GAAP earnings are anticipated to be $1.50 per share at the mid-point.
How Have Estimates Been Moving Since Then?
Fresh estimates followed an upward path over the past two months.
At this time, Skyworks has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Skyworks has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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