A month has gone by since the last earnings report for Cirrus Logic (CRUS Quick QuoteCRUS - Free Report) . Shares have lost about 10% in that time frame, underperforming the S&P 500.

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

Cirrus Logic Tops Q2 Earnings & Revenue Estimates

Cirrus Logic delivered better-than-expected second-quarter fiscal 2021 results. The company’s quarterly non-GAAP earnings per share of $1.26 handily outpaced the Zacks Consensus Estimate of 89 cents. However, the bottom-line figure declined 18.7% on a year-over-year basis mainly on lower revenues, partially offset by reduced operating expenses.

Nonetheless, the company registered more than two-fold jump in quarterly earnings on a sequential basis, primarily driven by higher revenues.

Revenues

Total revenues of $347.3 million surpassed the Zacks Consensus Estimate of $310.5 million but declined 10.7% year on year. Revenues, however, jumped 43.1% sequentially on higher-than-expected unit volumes for certain components shipping in smartphones, tablets and wellness headsets.

Segment wise, portable audio product revenues (90% of total revenues) came in at $312.9 million, up 10.4% year over year. Nevertheless, non-portable audio and other products (10%) fell 12.9% to $34.4 million. Sequentially, the audio product segment’s revenues climbed 48.5%, while non-portable and other products sales grew 7.8%.

Profits & Margins

Non-GAAP gross profit of $180.4 million decreased 13.3% on a year-over-year basis. Non-GAAP gross margin contracted 160 basis points (bps) to 51.9%, chiefly due to lower revenues.

Non-GAAP gross profit increased 41.4% sequentially. Nonetheless, non-GAAP gross margin shrunk 70 bps to 51.9%.

Cirrus Logic’s non-GAAP operating expenses dropped 3.2% year over year to $97.8 million. However, operating expenses flared up 5.6% sequentially.

Non-GAAP operating income of $82.6 million dipped 22.9% year on year, but improved 133.9% sequentially. Non-GAAP operating margin of 23.8% contracted 380 bps from the year-ago quarter but expanded 920 bps from the previous quarter.

Balance Sheet and Cash Flow

The company exited the fiscal second quarter with cash and marketable securities of $284.2 million compared with the $315.9 million witnessed at the end of the prior quarter.

Accounts receivables were $181.5 million compared with the $136.5 million recorded in first-quarter fiscal 2021. Notably, the company did not have any long-term debt as of Sep 26, 2020.

Q3 Outlook

For the third quarter of fiscal 2021, the company projects revenues between $440 million and $480 million. At the mid-point, the guidance suggests growth of 23% year on year and 32% sequentially.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -14.88% due to these changes.

VGM Scores

Currently, Cirrus Logic has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Following the exact same course, 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 broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Cirrus Logic has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.