It has been about a month since the last earnings report for Cirrus Logic (CRUS - Free Report) . Shares have lost about 10.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Cirrus Logic due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Cirrus Logic's Q1 Earnings Beat Estimates, Up Y/Y
Cirrus Logic delivered better-than-expected first-quarter fiscal 2021 results. The company’s quarterly non-GAAP earnings per share of 53 cents handily outpaced the Zacks Consensus Estimate of 30 cents, surging approximately 51% year on year.
This year-over-year growth was mainly driven by higher revenues and reduced operating expenses. However, the company’s bottom-line results dipped nearly 22% sequentially mainly on lower revenues compared with the fourth-quarter fiscal 2020 figure.
Total revenues of $242.6 million also surpassed the Zacks Consensus Estimate of $226 million and improved 2% year over year as well. Increased component shipments and higher content in tablets primarily aided the top line.
However, on a sequential basis, revenues declined 13% due to reduction in unit volumes for certain components shipping in flagship smartphones. Nonetheless, increased component shipments for the recently-launched lower-cost smartphone model partially offset this sequential decline in revenues.
Segment wise, portable audio product revenues (87% of total revenues) came in at $210.7 million, up 3.8% year over year. However, non-portable audio and other products (13%) decreased 9.6% to $31.9 million. Sequentially, the audio product segment’s revenues slid 15.6%, while non-portable and other products sales increased 8%.
Profits & Margins
Non-GAAP gross profit of $127.7 million increased 4% on a year-over-year basis. Non-GAAP gross margin expanded 110 basis points (bps) to 52.6%, chiefly on supply-chain efficiencies. Favorable product mix and cost reductions on certain products were also positives.
Non-GAAP gross profit decreased 12.8% sequentially. However, non-GAAP gross margin improved 20 bps to 52.6%. The sequential improvement in gross margin mainly reflects supply-chain efficiencies.
Cirrus Logic’s non-GAAP operating expenses dropped 7.3% year over year to $92.3 million. Operating expenses also declined 6.4% sequentially.
Non-GAAP operating income of $35.3 million too surged 52.6% year on year. However, it dropped 25.8% sequentially. Non-GAAP operating margin of 14.6% expanded 490 bps from the year-ago quarter but shrunk 250 bps from the previous quarter.
Balance Sheet and Cash Flow
The company exited the fiscal first quarter with cash and marketable securities of $315.9 million compared with the $314.1 million witnessed at the end of the prior quarter.
Accounts receivables were $136.5 million compared with the $154 million recorded in fourth-quarter fiscal 2020. Notably, the company did not have any long-term debt as of Jun 27, 2020.
Cash flow from operations was $0.5 million in the fiscal first quarter. As of Jun 27, 2020, Cirrus Logic has $120 million remaining under its share-repurchase authorization.
For the second quarter of fiscal 2021, the company projects revenues between $290 million and $330 million. At the mid-point, the guidance reflects a 20% year-over-year decline but an improvement of 28% sequentially.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
At this time, Cirrus Logic has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Cirrus Logic has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.