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Cirrus Logic (CRUS) Posts Dismal Q3 Earnings, Shares Fall
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Cirrus Logic Inc. (CRUS - Free Report) showcased dismal top-line performance in fiscal third-quarter 2018, which resulted in a 10.7% decline in shares in after-hours trade yesterday. Notably, the stock has significantly underperformed the industry to which it belongs in the last year. Cirrus Logic has lost 19.1% of its value in the said period while the industry is up 11.4%.
The company reported non-GAAP earnings per share of $1.59 per share, which fell short of the Zacks Consensus Estimate of $1.77 per share and also declined 15% year over year.
Quarter Details
Total revenues decreased approximately 7.7% year over year to $482.7 million and also missed the Zacks Consensus Estimate of $532 million. Moreover, revenues fell short of the guided range $510-$550 million (mid-point $530 million) as well.
Management primarily attributed the lower-than-expected results to sudden decrease in demand for smartphones in the later part of December.
Segment wise, Portable audio product revenues (90.9% of the total revenues) came in at $438.7 million, down 9.3% year over year. Meanwhile, non-portable audio and other products (9.1%) increased 3.2% year over year and came in at $44.1 million.
Non-GAAP gross profit was $235.5 million, which increased 11.3% on a year-over-year basis. However, as a percentage of revenues, the figure was almost flat compared with the year-ago quarter.
Non-GAAP operating expenses increased 17.9% on a year-over-year basis to $107.9 million. As a percentage of revenues, the same increased 490 bps from the year-ago quarter to 22.3%. This in turn negatively impacted operating results.
Cirrus Logic’s non-GAAP operating income was $127.6 million, down 22.2% year over year, primarily due to higher operating expenses. Also, operating margin contracted 490 bps on a year-over-year basis and came in at 26.4%.
On a non-GAAP basis, Cirrus Logic reported net income of $104.2 million compared with $124.7 million reported in the year-ago quarter. This marked a decline of 16.5%.
The company exited the quarter with cash, cash equivalents and marketable securities of $239.5 million compared with $195.6 million at the end of the previous quarter. Accounts receivables were $217.6 million compared with $232.4 million in the last quarter. Notably, it did not have any long-term debt during the quarter.
Its board of directors authorized the repurchase of up to an additional $200 million of the company's common stock in addition to the $60.2 million remaining from previous share authorization in October 2015.
Cirrus Logic, Inc. Price, Consensus and EPS Surprise
Cirrus Logic provided guidance for fourth-quarter fiscal 2018. Notably, the lowered demand for smartphones has resulted in tepid outlook. For the fourth quarter, the company expects revenues in the range of $300–$340 million (mid-point $320 million). The Zacks Consensus Estimate is pegged at $370.4 million. The company predicts GAAP gross margin to be in the range of 48-50%. Combined GAAP R&D and SG&A expenses are anticipated within $130 million and $136 million.
Our Take
Cirrus Logic, a premier supplier of high-performance analog circuits and advanced mixed-signal chip solutions, reported lower-than-expected third-quarter results and provided unimpressive fourth-quarter revenue guidance.
We anticipate that lower iPhone X adoption will continue to hurt the company’s top line with Apple being the highest revenue contributor for the company. According to Nikkei, which was quoted by The Inquirer, Apple recently slashed its production target by half from almost 40 million projected at the time of iPhone X release. Apple has cited sluggish holiday season sales for its decision to cut production.
All these are expected to have an adverse impact on Cirrus Logic’s financials at least in the near term. Nevertheless, management remains optimistic about the company’s product portfolio related to audio and voice applications, which might partially offset the headwinds.
Zacks Rank and Key Picks
Cirrus Logic carries a Zacks Rank #5 (Strong Sell).
Long-term EPS growth rate for Micron, The Trade Desk and Lam Research is projected to be 10%, 25% and 14.9%, respectively.
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Cirrus Logic (CRUS) Posts Dismal Q3 Earnings, Shares Fall
Cirrus Logic Inc. (CRUS - Free Report) showcased dismal top-line performance in fiscal third-quarter 2018, which resulted in a 10.7% decline in shares in after-hours trade yesterday. Notably, the stock has significantly underperformed the industry to which it belongs in the last year. Cirrus Logic has lost 19.1% of its value in the said period while the industry is up 11.4%.
The company reported non-GAAP earnings per share of $1.59 per share, which fell short of the Zacks Consensus Estimate of $1.77 per share and also declined 15% year over year.
Quarter Details
Total revenues decreased approximately 7.7% year over year to $482.7 million and also missed the Zacks Consensus Estimate of $532 million. Moreover, revenues fell short of the guided range $510-$550 million (mid-point $530 million) as well.
Management primarily attributed the lower-than-expected results to sudden decrease in demand for smartphones in the later part of December.
Segment wise, Portable audio product revenues (90.9% of the total revenues) came in at $438.7 million, down 9.3% year over year. Meanwhile, non-portable audio and other products (9.1%) increased 3.2% year over year and came in at $44.1 million.
Non-GAAP gross profit was $235.5 million, which increased 11.3% on a year-over-year basis. However, as a percentage of revenues, the figure was almost flat compared with the year-ago quarter.
Non-GAAP operating expenses increased 17.9% on a year-over-year basis to $107.9 million. As a percentage of revenues, the same increased 490 bps from the year-ago quarter to 22.3%. This in turn negatively impacted operating results.
Cirrus Logic’s non-GAAP operating income was $127.6 million, down 22.2% year over year, primarily due to higher operating expenses. Also, operating margin contracted 490 bps on a year-over-year basis and came in at 26.4%.
On a non-GAAP basis, Cirrus Logic reported net income of $104.2 million compared with $124.7 million reported in the year-ago quarter. This marked a decline of 16.5%.
The company exited the quarter with cash, cash equivalents and marketable securities of $239.5 million compared with $195.6 million at the end of the previous quarter. Accounts receivables were $217.6 million compared with $232.4 million in the last quarter. Notably, it did not have any long-term debt during the quarter.
Its board of directors authorized the repurchase of up to an additional $200 million of the company's common stock in addition to the $60.2 million remaining from previous share authorization in October 2015.
Cirrus Logic, Inc. Price, Consensus and EPS Surprise
Cirrus Logic, Inc. Price, Consensus and EPS Surprise | Cirrus Logic, Inc. Quote
Guidance
Cirrus Logic provided guidance for fourth-quarter fiscal 2018. Notably, the lowered demand for smartphones has resulted in tepid outlook. For the fourth quarter, the company expects revenues in the range of $300–$340 million (mid-point $320 million). The Zacks Consensus Estimate is pegged at $370.4 million. The company predicts GAAP gross margin to be in the range of 48-50%. Combined GAAP R&D and SG&A expenses are anticipated within $130 million and $136 million.
Our Take
Cirrus Logic, a premier supplier of high-performance analog circuits and advanced mixed-signal chip solutions, reported lower-than-expected third-quarter results and provided unimpressive fourth-quarter revenue guidance.
We anticipate that lower iPhone X adoption will continue to hurt the company’s top line with Apple being the highest revenue contributor for the company. According to Nikkei, which was quoted by The Inquirer, Apple recently slashed its production target by half from almost 40 million projected at the time of iPhone X release. Apple has cited sluggish holiday season sales for its decision to cut production.
All these are expected to have an adverse impact on Cirrus Logic’s financials at least in the near term. Nevertheless, management remains optimistic about the company’s product portfolio related to audio and voice applications, which might partially offset the headwinds.
Zacks Rank and Key Picks
Cirrus Logic carries a Zacks Rank #5 (Strong Sell).
Some of the better-ranked stocks in the broader technology sector are Micron Technology, Inc. (MU - Free Report) , The Trade Desk Inc. (TTD - Free Report) and Lam Research Corporation (LRCX - Free Report) , all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term EPS growth rate for Micron, The Trade Desk and Lam Research is projected to be 10%, 25% and 14.9%, respectively.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>