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Why Is Semtech (SMTC) Up 17.6% Since Last Earnings Report?
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A month has gone by since the last earnings report for Semtech (SMTC - Free Report) . Shares have added about 17.6% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Semtech due for a pullback? 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.
Semtech Corporation’s non-GAAP earnings of 34 cents per share were in line with the Zacks Consensus Estimate. The reported earnings decreased 38.2% sequentially but increased 61.9% year over year.
Non-GAAP revenues of $131.4 million decreased 17.9% sequentially but increased 0.71% from the prior-year quarter. The year-over-year increase was driven by growth in IoT, data center and mobile markets. Revenues surpassed the Zacks Consensus Estimate by 0.64% and came in within the guided range of $121-$135 million.
According to management, the sequential decline was due to a weaker overall global demand environment in all the end markets served by the company.
Key growth drivers for Semtech are product differentiation, operational flexibility, and a specific focus on fast-growing segments and regions.
Let’s delve into the numbers in detail:
Revenues by End Market
Sales to the enterprise computing end market, which represented 27% of its total revenues, decreased on a sequential basis.
Also, industrial and communications end markets both decreased sequentially, representing 30% and 10% of the total revenues, respectively.
However, sales to the high-end consumer market represented 33% of the total revenues, increasing 13% sequentially. Roughly 25% of high-end consumer revenues were attributable to mobile devices and 8% to other consumer systems.
Revenues by Product Group
Signal Integrity Product Group revenues contributed 438% to total sales and decreased 30% sequentially. Weakness in data-center demand, PON and wireless base station led to the decline.
Revenues from Protection Product Group represented 30% of the total revenues and were down 8% sequentially.
Revenues from Wireless and Sensing Product Group, which contributed 32% to total revenues, were down 9% sequentially.
Bookings
Bookings, which accounted for roughly 47% of the shipments, increased on a sequential basis during the quarter. The book-to-bill ratio was above 1.
Margins and Net Income
Non-GAAP gross margin was 62.2%, up 10 basis points (bps) sequentially and 710 bps from the year-ago quarter.
Semtech’s adjusted operating expenses of $53.1 million were flat on a year-over-year basis.
As a result, its operating margin of 21.8% was down 710 bps sequentially but up 700 bps year over year.
Balance Sheet & Cash Flow
Semtech ended the quarter with cash and cash equivalents of $287.3 million versus $312.1 million in the fiscal fourth quarter. Accounts receivables were $66.5 million, down from $79.2 million in the fiscal fourth quarter. Long-term debt was $188.3 million, down from $192.8 million in the fiscal fourth quarter.
During the quarter, cash flow from operations was $6.7 million, capital expenditure amounted to $15.3 million and free cash flow totaled $8.5 million.
Guidance
For fiscal second-quarter 2020, management expects revenues in the range of $128-$142 million.
Non-GAAP gross profit margin is expected within 61.9-62.5%. Management projects SG&A expenses within $28-$29 million, and research and development costs in the range of $24-$25 million. Non-GAAP earnings per share are expected in the range of 32-40 cents.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -7.45% due to these changes.
VGM Scores
At this time, Semtech has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. 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, Semtech has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is Semtech (SMTC) Up 17.6% Since Last Earnings Report?
A month has gone by since the last earnings report for Semtech (SMTC - Free Report) . Shares have added about 17.6% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Semtech due for a pullback? 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.
Semtech's Q1 Earnings Match, Revenues Beat Estimates
Semtech Corporation’s non-GAAP earnings of 34 cents per share were in line with the Zacks Consensus Estimate. The reported earnings decreased 38.2% sequentially but increased 61.9% year over year.
Non-GAAP revenues of $131.4 million decreased 17.9% sequentially but increased 0.71% from the prior-year quarter. The year-over-year increase was driven by growth in IoT, data center and mobile markets. Revenues surpassed the Zacks Consensus Estimate by 0.64% and came in within the guided range of $121-$135 million.
According to management, the sequential decline was due to a weaker overall global demand environment in all the end markets served by the company.
Key growth drivers for Semtech are product differentiation, operational flexibility, and a specific focus on fast-growing segments and regions.
Let’s delve into the numbers in detail:
Revenues by End Market
Sales to the enterprise computing end market, which represented 27% of its total revenues, decreased on a sequential basis.
Also, industrial and communications end markets both decreased sequentially, representing 30% and 10% of the total revenues, respectively.
However, sales to the high-end consumer market represented 33% of the total revenues, increasing 13% sequentially. Roughly 25% of high-end consumer revenues were attributable to mobile devices and 8% to other consumer systems.
Revenues by Product Group
Signal Integrity Product Group revenues contributed 438% to total sales and decreased 30% sequentially. Weakness in data-center demand, PON and wireless base station led to the decline.
Revenues from Protection Product Group represented 30% of the total revenues and were down 8% sequentially.
Revenues from Wireless and Sensing Product Group, which contributed 32% to total revenues, were down 9% sequentially.
Bookings
Bookings, which accounted for roughly 47% of the shipments, increased on a sequential basis during the quarter. The book-to-bill ratio was above 1.
Margins and Net Income
Non-GAAP gross margin was 62.2%, up 10 basis points (bps) sequentially and 710 bps from the year-ago quarter.
Semtech’s adjusted operating expenses of $53.1 million were flat on a year-over-year basis.
As a result, its operating margin of 21.8% was down 710 bps sequentially but up 700 bps year over year.
Balance Sheet & Cash Flow
Semtech ended the quarter with cash and cash equivalents of $287.3 million versus $312.1 million in the fiscal fourth quarter. Accounts receivables were $66.5 million, down from $79.2 million in the fiscal fourth quarter. Long-term debt was $188.3 million, down from $192.8 million in the fiscal fourth quarter.
During the quarter, cash flow from operations was $6.7 million, capital expenditure amounted to $15.3 million and free cash flow totaled $8.5 million.
Guidance
For fiscal second-quarter 2020, management expects revenues in the range of $128-$142 million.
Non-GAAP gross profit margin is expected within 61.9-62.5%. Management projects SG&A expenses within $28-$29 million, and research and development costs in the range of $24-$25 million. Non-GAAP earnings per share are expected in the range of 32-40 cents.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -7.45% due to these changes.
VGM Scores
At this time, Semtech has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. 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, Semtech has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.