A month has gone by since the last earnings report for Qorvo (QRVO Quick QuoteQRVO - Free Report) . Shares have lost about 1.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Qorvo 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 drivers.

Qorvo Q1 Earnings Beat Estimates, Revenues Rise Y/Y

Qorvo Inc. reported first-quarter fiscal 2021 non-GAAP earnings of $1.50 per share, which improved 10.3% on a year-over-year basis. The figure surpassed the Zacks Consensus Estimate by 32.7%.

Revenues increased 1.5% year over year to $787.5 million. Further, the top line outpaced the consensus mark by 7.8%. Moreover, the figure was above management’s guidance of $710 million to $750 million.

Improvement in Infrastructure and Defense (IDP) contributed to the results. Moreover, the company benefited from broad-based demand in 5G handsets, Wi-Fi 6 and IoT products.

Quarter Details

Segment-wise, Mobile Products (MP) revenues of $468 million, exceeded the company’s expectations, driven by resilient mobile and handset demand. Impact of global supply chain disruptions due to COVID-19 was also less than initially expected.

During the fiscal first quarter, the company witnessed robust traction for its 5G solutions. These offerings are highly integrated and high-performance solutions, which enable customers to reduce product footprint and accelerate products to market.

Additionally, Qorvo’s mid-high-band and ultra-high-band 5G solutions are being adopted by all leading 5G chipsets.

Further, synergies from Decawave, Active-Semi and MEMS technology acquisitions have significantly expanded Qorvo’s capabilities and positions it well to benefit from growing demand for proximity awareness, secure payments and secure access for smartphones, automotive and IoT.

IDP revenues grew double-digit year over year to $319 million. The year-over-year increase can primarily be attributed to robust growth in the company’s wireless connectivity, improvement in 5G base station deployments and robust 5G infrastructure market demand.

Further, growth reflects strong demand for the company’s solutions in defense (advanced radars and power management technologies and other electronic warfare products) and connectivity (Wi-Fi 6 and emerging IoT applications). Rapid adoption of gallium nitride or GaN for high-power applications also drove the defense top line.

Notably, uptick in GaN high-power amplifiers and small signal components improved during the reported quarter, driven by increasing deployment of 5G massive MIMO antennas.

In the connectivity and broadband business, the company increased shipments of Wi-Fi 6 solutions and secured multiple cable amplifier design wins to cater to rising need for data to home owing to COVID-19 induced shelter-in-place guidelines. Notably, Qorvo expanded its global customer base for Wi-Fi 6 solutions, front-end modules (FEM) and BAW filters during the quarter under review.

Moreover, the acquisition of Custom MMIC enhanced Qorvo’s capabilities in the defense and aerospace end-markets.

In the programmable power management business, the company’s programmable ICs enjoyed solid momentum driven by robust growth in data center, computing and gaming consoles.

Operational Details

Non-GAAP gross margin expanded 240 basis points (bps) from the year-ago quarter to 48.6%. This can be attributed to lower manufacturing cost and favorable product mix.

Non-GAAP operating expenses increased 6.4% year over year to $178.7 million.

Non-GAAP operating income improved 7.2% to $203.7 million. Non-GAAP operating margin expanded 140 bps from the year-ago quarter to 25.9%.

Balance Sheet & Cash Flow

As of Jun 27, 2020, cash and cash equivalents were $1.14 billion compared with $714.9 million reported as of Mar 28, 2020.

As of Jun 27, 2020, long-term debt was $1.87 billion compared with $1.57 billion as of Mar 28, 2020. The company also concluded the quarter with unused $300 million unsecured revolver.

Net cash provided by operating activities was $214.3 million, flat sequentially. Free cash flow during the reported quarter came in at $184.4 million, compared with $179.2 million in the prior quarter.

During the fiscal first quarter, the company repurchased shares worth $75 million under the share repurchase program.

Q2 View

For second-quarter fiscal 2021, Qorvo anticipates revenues between $925 million and $955 million.

Sequential improvement in smartphone vertical and consistent growth across 5G infrastructure, power management, 5G base stations, Wi-Fi 6 solutions, and defense end-markets is anticipated to drive performance in second-quarter fiscal 2021.

Non-GAAP earnings are projected to be $1.90 per share at the mid-point.

Non-GAAP gross margin is anticipated to be 50%.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month. The consensus estimate has shifted 44.24% due to these changes.

VGM Scores

Currently, Qorvo 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 C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Qorvo has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.