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Knowles (KN) Q3 Earnings & Revenues Match Estimates, Down Y/Y

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Knowles Corporation (KN - Free Report) reported decent third-quarter 2020 results, wherein the top and the bottom lines matched the respective Zacks Consensus Estimate.

Net Income

On a GAAP basis, net income (from continuing operations) was $5.6 million or 6 cents per share compared with $25.4 million or 27 cents per share in the year-ago quarter. The decline was primarily caused by lower operating income.

Quarterly non-GAAP net income came in at $22.3 million or 24 cents per share compared with $35.8 million or 38 cents per share in the prior-year quarter. The bottom line matched the Zacks Consensus Estimate.

Knowles Corporation Price, Consensus and EPS Surprise Knowles Corporation Price, Consensus and EPS Surprise

Knowles Corporation price-consensus-eps-surprise-chart | Knowles Corporation Quote

Revenues

Quarterly revenues declined 12.8% year over year to $205.8 million, primarily due to challenges induced by the COVID-19 pandemic. However, the figure surpassed the company’s guidance of $185 million to $200 million.

Revenues grew 35.2% sequentially, driven by stronger-than-expected MEMS microphone demand in multiple end markets and higher-than-expected shipments into the hearing health market. The top line matched the Zacks Consensus Estimate.

Audio revenues declined 14.9% year over year to $164.8 million. The segment’s gross profit was $58.9 million compared with $77.9 million in the prior-year quarter.

Precision Devices revenues decreased 2.8% to $41 million. The segment’s gross profit was $16.7 million compared with $16 million in the year-ago quarter.

Other Details

Cost of goods sold decreased to $130.6 million from $142.3 million year over year. Overall gross profit declined to $75.2 million from $93.5 million for a margin of 36.5% and 39.6%, respectively. Total operating expenses were $61.6 million compared with $59.9 million in the prior-year quarter. Operating income came in at $13.6 million compared with $33.6 million a year ago.

Cash Flow & Liquidity

In the first nine months of 2020, Knowles generated $52.6 million of cash from operating activities. For the same period, free cash flow was $32.2 million. As of Sep 30, the company had $139.1 million in cash and cash equivalents with $213 million of long-term debt.

Q4 Outlook

Knowles has provided guidance for fourth-quarter 2020. On a continuing operations basis, the company expects non-GAAP revenues in the range of $210-$225 million. Non-GAAP gross profit margin is estimated in the range of 36-38%. Non-GAAP earnings are projected in the band of 27-33 cents per share.

Zacks Rank & Other Stocks to Consider

Currently, Knowles carries a Zacks Rank #2 (Buy) and has a VGM Score of B.

Some other top-ranked stocks in the broader industry are Viasat (VSAT - Free Report) , Viavi Solutions (VIAV - Free Report) and Harmonic (HLIT - Free Report) , each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Viasat delivered a trailing four-quarter positive earnings surprise of 361.3%, on average.

Viavi delivered a trailing four-quarter positive earnings surprise of 17.5%, on average.

Harmonic delivered a trailing four-quarter positive earnings surprise of 41%, on average. The company’s earnings beat the Zacks Consensus Estimate in three of the last four quarters.

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