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ASE Technology (ASX) to Post Q2 Earnings: What's in the Cards?

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ASE Technology Holding Co., Ltd. (ASX - Free Report) is scheduled to report second-quarter 2020 results on Jul 31.

For the second quarter, the company expects ATM segment revenues to be in line with third-quarter 2019 reported figure of NT$67.9 billion. Meanwhile, EMS segment revenues are expected to be higher than first-quarter 2019 reported figure of NT$34.9 billion.

Notably, the company has announced unaudited consolidated revenues of NT$36.5 billion ($1.22 billion), NT$35.8 billion ($1.2 billion) and NT$35.3 billion ($1.17 billion) for May, June and April, respectively.

Q1 Results at a Glance

In first-quarter 2020, the company reported revenues of NT$97.36 billion, up 10% from the year-ago quarter’s but down 16% sequentially.

Diluted earnings during the first quarter were NT$0.89 ($0.06 per ADS) per share, up 93% from the prior-year quarter and 39% sequentially.

Factors to Note

Robust traction for system-in-package (SiP) products is likely to have driven EMS revenue growth in the to-be-reported quarter.

Moreover, the company is well poised to capitalize on evolution of semiconductor manufacturing processes from 10 nanometer (nm) to 7 nm and even 5 nm technology. Further, increasing use of more advanced transistor and input-output (I/O) densities in semiconductor packaging and testing technologies might have benefited SIP related system level requirements. This may get reflected in the second-quarter revenues.

Additionally, the ATM segment’s second-quarter revenues are likely to reflect solid momentum in the company’s test solutions.
 

Notably, in first-quarter 2020, the company generated ATM revenues of $66.2 billion, up 22% year over year, driven by growth within flip chip, bumping, and SiP products. The momentum is likely to have continued in the quarter to be reported owing to the growing popularity of 5G-related devices and strength in communications end-market, driven by coronavirus crisis-induced demand for higher bandwidth amid rapid increase in Internet use.

Besides the company’s investments in geographical expansion may have aided it in acquiring new customers. This is anticipated to have benefited the to-be-reported quarter’s performance.

However, increased expenditure on Research & Development (R&D) and employee compensation are likely to have kept margins under pressure in the quarter under review.

Moreover, the coronavirus pandemic has caused delays in production, which might get reflected in the second-quarter revenues. The crisis-led supply chain disruptions across supplies and components are also likely to have acted as headwinds in the quarter to be reported.

Broader macroeconomic weakness across automotive end market is likely to have dampened revenue growth.

Zacks Rank & Stocks to Consider

ASE Technology currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector are Fastly, Inc. (FSLY - Free Report) , Synaptics Incorporated (SYNA - Free Report) and Microchip Technology Incorporated (MCHP - Free Report) . While Microchip sports a Zacks Rank #1 (Strong Buy), both Fastly and Synaptics carries a Zacks Rank #2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

While both Fastly & Synaptics are set to report earnings on Aug 5, Microchip is slated to release financial numbers on Aug 4.

Long-term earnings growth rate of Fastly, Microchip and Synaptics is pegged at 25%, 14.5% and 10%, respectively.

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