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Skyworks (SWKS) Beats Q1 Earnings & Revenues; Stock Up
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Skyworks Solutions Inc. (SWKS - Free Report) reported first-quarter fiscal 2017 non-GAAP earnings of $1.61 per share, which increased 0.6% from the year-ago quarter and 9.5% on a sequential basis. Further, the figure beat management’s guidance by 3 cents.
Earnings (including stock-based compensation) were almost $1.50 per share, beating the Zacks Consensus Estimate by couple of cents.
Revenues of $914.3 million were down 1.3% year over year but increased 9.4% sequentially and were ahead of management guidance (up 7–9% sequentially) and Zacks Consensus Estimate of $902 million.
Notably, Skyworks largest customer (Apple) contributed 40% of quarterly revenues, while Huawei was the second largest customer in the quarter.
Shares surged 7.7% in after-hour trading, following the earnings announcement.
Internet of Things (IoT), 5G, Automotive Key Drivers
Skyworks continues to capitalize on global mobile connectivity and demand for high-performance solutions across a diverse set of verticals and the Internet of Things (IoT) market. The demand for system-level solutions and higher levels of integration are increasing, as customers implement the next level of functionality for higher bandwidth. These in turn are playing directly into Skyworks' strengths and generating huge demand for its products.
During the quarter, the company’s SkyOne platform won contracts from multiple Tier 1 original equipment manufacturers (OEM). Its SkyBlue technology was integrated into Huawei’s Mate9 platform. Skyworks launched multiple devices across Samsung's entire portfolio and gained momentum in China, with key wins at market leaders Oppo, Vivo, Meizu and Xiaomi.
Skyworks penetration improved in the IoT market through design wins from Netgear (NTGR - Free Report) , Amazon (AMZN - Free Report) , Google and Microsoft (MSFT - Free Report) . Further, its products were selected by Linksys, Ubiquiti Networks and other leading OEMs. The company also expended its presence in the automotive sector through a strategic design win at a leading U.S. electric car OEM.
Skyworks believes that connected car market and 5G are significant growth drivers for the company going ahead. Market projection suggests 5G data rates to be 10X the speed of card 4G and LTE solutions. Based on its product portfolio the company is well positioned to address the connectivity challenges both these markets present. This will eventually drive top-line growth in the long run.
Margin Contracts
Non-GAAP gross margin contracted 20 basis points (bps) on a year-over-year basis but remained almost flat sequentially to 50.7%.
Research & development (R&D) expense increased 20 bps, while selling, general & administrative (SG&A) expense remained almost flat from the year-ago quarter. Sequentially R&D expense increased 20 bps but SG&A decreased 80 bps.
The increase in R&D reflects Skyworks continuing investments in expanding its business, particularly in the IoT market.
As a result, non-GAAP operating margin contracted 50 bps on a year-over-year basis but expanded 60 bps sequentially to 36.4% in the reported quarter.
Balance Sheet & Cash Flow
As of Dec 30, 2016, cash & cash equivalents were $1.08 billion, up $266.7 million sequentially. Cash flow from operating activities was $495.9 million as compared with $455 million reported in the previous quarter.
In the first quarter, Skyworks repurchased 1.4 million shares at an average price of roughly $76 a share.
Guidance
For second-quarter fiscal 2017, revenues are expected to be up 8% year over year (as forecasted earlier in the first-quarter earnings call) to $840 million.
Although revenues will decline seasonally (almost 8%) due to seasonal weakness, the figure is expected to better-than the Zacks Consensus Estimate that was pegged at $809.4 million.
Gross margin is expected to be in the low 50% range, while operating expenses to be $115 million. Management stated that it is well poised for margin expansion in second-half 2017, driven by sequential revenue growth.
Non-GAAP earnings are anticipated to be $1.40 per share, much better-than the Zacks Consensus Estimate that was pegged at $1.28.
Skyworks also announced a new share buyback program worth $500 million.
Share Price Expected to Rebound
Notably, Skywork shares have gained 23.9% in the last one year, underperforming the Zacks Semiconductors - Radio Frequency industry’s return of 31.8%. We expect the first-quarter beat, positive guidance, aggressive share buyback and improving growth prospects to help the stock rebound in the rest of 2017.
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Skyworks (SWKS) Beats Q1 Earnings & Revenues; Stock Up
Skyworks Solutions Inc. (SWKS - Free Report) reported first-quarter fiscal 2017 non-GAAP earnings of $1.61 per share, which increased 0.6% from the year-ago quarter and 9.5% on a sequential basis. Further, the figure beat management’s guidance by 3 cents.
Earnings (including stock-based compensation) were almost $1.50 per share, beating the Zacks Consensus Estimate by couple of cents.
Revenues of $914.3 million were down 1.3% year over year but increased 9.4% sequentially and were ahead of management guidance (up 7–9% sequentially) and Zacks Consensus Estimate of $902 million.
Skyworks Solutions Inc. Price and Consensus
Skyworks Solutions Inc. Price and Consensus | Skyworks Solutions Inc. Quote
Notably, Skyworks largest customer (Apple) contributed 40% of quarterly revenues, while Huawei was the second largest customer in the quarter.
Shares surged 7.7% in after-hour trading, following the earnings announcement.
Internet of Things (IoT), 5G, Automotive Key Drivers
Skyworks continues to capitalize on global mobile connectivity and demand for high-performance solutions across a diverse set of verticals and the Internet of Things (IoT) market. The demand for system-level solutions and higher levels of integration are increasing, as customers implement the next level of functionality for higher bandwidth. These in turn are playing directly into Skyworks' strengths and generating huge demand for its products.
During the quarter, the company’s SkyOne platform won contracts from multiple Tier 1 original equipment manufacturers (OEM). Its SkyBlue technology was integrated into Huawei’s Mate9 platform. Skyworks launched multiple devices across Samsung's entire portfolio and gained momentum in China, with key wins at market leaders Oppo, Vivo, Meizu and Xiaomi.
Skyworks penetration improved in the IoT market through design wins from Netgear (NTGR - Free Report) , Amazon (AMZN - Free Report) , Google and Microsoft (MSFT - Free Report) . Further, its products were selected by Linksys, Ubiquiti Networks and other leading OEMs. The company also expended its presence in the automotive sector through a strategic design win at a leading U.S. electric car OEM.
Skyworks believes that connected car market and 5G are significant growth drivers for the company going ahead. Market projection suggests 5G data rates to be 10X the speed of card 4G and LTE solutions. Based on its product portfolio the company is well positioned to address the connectivity challenges both these markets present. This will eventually drive top-line growth in the long run.
Margin Contracts
Non-GAAP gross margin contracted 20 basis points (bps) on a year-over-year basis but remained almost flat sequentially to 50.7%.
Research & development (R&D) expense increased 20 bps, while selling, general & administrative (SG&A) expense remained almost flat from the year-ago quarter. Sequentially R&D expense increased 20 bps but SG&A decreased 80 bps.
The increase in R&D reflects Skyworks continuing investments in expanding its business, particularly in the IoT market.
As a result, non-GAAP operating margin contracted 50 bps on a year-over-year basis but expanded 60 bps sequentially to 36.4% in the reported quarter.
Balance Sheet & Cash Flow
As of Dec 30, 2016, cash & cash equivalents were $1.08 billion, up $266.7 million sequentially. Cash flow from operating activities was $495.9 million as compared with $455 million reported in the previous quarter.
In the first quarter, Skyworks repurchased 1.4 million shares at an average price of roughly $76 a share.
Guidance
For second-quarter fiscal 2017, revenues are expected to be up 8% year over year (as forecasted earlier in the first-quarter earnings call) to $840 million.
Although revenues will decline seasonally (almost 8%) due to seasonal weakness, the figure is expected to better-than the Zacks Consensus Estimate that was pegged at $809.4 million.
Gross margin is expected to be in the low 50% range, while operating expenses to be $115 million. Management stated that it is well poised for margin expansion in second-half 2017, driven by sequential revenue growth.
Non-GAAP earnings are anticipated to be $1.40 per share, much better-than the Zacks Consensus Estimate that was pegged at $1.28.
Skyworks also announced a new share buyback program worth $500 million.
Share Price Expected to Rebound
Notably, Skywork shares have gained 23.9% in the last one year, underperforming the Zacks Semiconductors - Radio Frequency industry’s return of 31.8%. We expect the first-quarter beat, positive guidance, aggressive share buyback and improving growth prospects to help the stock rebound in the rest of 2017.
Skyworks currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
The Best Place to Start Your Stock Search
Today, you are invited to download the full list of 220 Zacks Rank #1 "Strong Buy" stocks – absolutely free of charge. Since 1988, Zacks Rank #1 stocks have nearly tripled the market, with average gains of +26% per year. Plus, you can access the list of portfolio-killing Zacks Rank #5 "Strong Sells" and other private research. See these stocks free >>