Back to top

Analyst Blog

We have downgraded our long-term recommendation on Skyworks Solutions, Inc. (SWKS - Analyst Report) to Underperform from Neutral based on its fourth quarter 2012 results.

Skyworks Solutions reported a net income of 44 cents per share in the fourth quarter of fiscal 2012 (excluding acquisition-related charges but including stock-based compensation expense), beating the Zacks Consensus Estimate by a penny.
 
Although the results were marginally ahead of the estimates, the company’s guidance was disappointing, and margins continue to be under pressure. 
 
For the fourth quarter of 2012, gross margin came in at 42.9%, slightly down from 43.2% in the previous quarter and 44.7% in the year-ago quarter. Operating margin came in at 24.6% versus 23.6% in the previous quarter and 27.2% in the year-ago quarter.
 
Going forward, Skyworks expects revenues of approximately $450 in the first quarter of fiscal 2013, up 14% year over year and 7% sequentially, driven by new platform wins and design momentum.
 
Gross margin is projected at around 43.0%. Management expects gross margin to improve as the company benefits from current capital investments and ramp up of margin accretive products like SkyOne, SkyHi along with its portfolio of high-performance analog products. Operating margin is anticipated to be approximately 25%. Skyworks expects earnings per share of 54 cents in the first quarter.
 
However, 7 out of the 8 analysts covering the stock have reduced their estimates for fiscal 2013 leading to a decline in annual earnings estimates. 
 
For 2014, earnings estimates have declined significantly as 2 out of 4 analysts have reduced their earnings estimates in the last few days. 
 
Our Take 
 
The weak economic environment will adversely impact demand at customers leading to a contraction in growth rates. We are also a bit wary of the ramp up at Samsung given the macroeconomic uncertainty.
 
As other handset players such as RF Micro Devices (RFMD - Snapshot Report) and TriQuint Semiconductor (TQNT - Analyst Report) gear up to capitalize on the increasing demand for smartphones, we expect pricing pressure to intensify in the market leading to a decline in margins.  
 
Our Underperform recommendation is supported by a Zacks #4 Rank, which translates into a short-term rating of Sell. 

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
RPC INC RES 24.91 +8.35%
LITHIA MOTO… LAD 94.59 +4.60%
DELTA AIR L… DAL 39.15 +3.90%
FLAMEL TECH… FLML 14.51 +3.50%
SOUTHWEST A… LUV 28.87 +2.92%