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Skyworks' (SWKS) Q2 Earnings Beat, Stock Down on Q3 View
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Skyworks Solutions (SWKS - Free Report) reported second-quarter fiscal 2021 non-GAAP earnings of $2.37 per share that beat the Zacks Consensus Estimate by 1.28% and surged 77% year over year.
Revenues of $1.172 billion surpassed the Zacks Consensus Estimate by 1.75%. Further, the top line improved 53% on a year-over-year basis.
The upside can be attributed to rapid deployment of 5G, which boosted demand for Skyworks’ mobile solutions. Mobile revenues surged 47% year over year, led by extensive content increase courtesy of ramp of 5G handsets across smartphone OEMs globally.
Also, broad markets continued to witness robust momentum. Revenues from Broad markets (contributed 33% to revenues) of $385 million, grew 67% year over year in the fiscal second quarter. The performance reflects gains from various use cases, including the adoption of technologies such as Wi-Fi 6 and 6E, uptick in 5G wireless infrastructure, and strength in automotive vertical. Ongoing momentum in audio solutions business deserves a special mention.
Shares Down On Tepid Q3 Guidance
Despite stellar fiscal second-quarter results, shares are down more than 7.5% in the pre-market trading on Apr 30, following bleak fiscal third-quarter guidance.
For third-quarter fiscal 2021, revenues are expected in the range of $1.075 billion to $1.125 billion (mid-point of $1.10 billion), representing revenue growth of 49% at the mid-point. Non-GAAP earnings are anticipated to be $2.13 per share at the mid-point of the revenue range, representing growth of 70% year over year.
Corresponding to the Zacks Consensus Estimate for revenues currently at $1.07 billion, the Zacks Consensus Estimate for earnings is pegged at $2.10 per share, for the fiscal third quarter.
Notably, Skyworks expects gross margin between 50.25% and 50.75%, and operating expenses between $159 million and $161 million.
On a year-to-date basis, shares of Skyworks have returned 29.4%, compared with the industry's rally of 23.2%.
Noteworthy Deal Wins
In the quarter under review, Skyworks’ Sky5 product portfolio continued to facilitate several premium and mid-tier 5G launches. Skyworks' solutions were utilized by Samsung, Xiaomi, OPPO, Vivo, and other Tier-1 players.
The company also partnered with NETGEAR (NTGR - Free Report) to deploy Wi-Fi 6 and 6E routers.
Also, Skyworks’ utilized wireless infrastructure portfolio, to install MIMO base stations with Ericsson (ERIC - Free Report) and Nokia.
The company’s Wi-Fi 6 engines secured gateways design wins at Nokia, Deutsche Telekom, and Altice.
Further, Volkswagen, LG and GM OnStar adopted Skyworks’ advanced telematics and infotainment offerings.
In the IoT space, Skyworks’ cellular IoT modules were selected by Quectel and Gemalto. Also, the company facilitated enhanced home security solutions at Xfinity.
The company is witnessing traction for its low-latency wireless audio platforms, supporting leading gaming headsets at Microsoft (MSFT - Free Report) and Sony. Moreover, Google Nest selected the company’s offerings for smart audio devices.
Skyworks Solutions, Inc. Price, Consensus and EPS Surprise
Non-GAAP gross margin expanded 60 basis points (bps) on a year-over-year basis to 50.8%. Notably, Skyworks had projected gross margin to be 50.5-51%.
Total operating expenses, as percentage of revenues, contracted 560 bps on a year-over-year basis to 17.4%.
Non-GAAP operating margin expanded 510 bps on a year-over-year basis to 37.6% in the reported quarter.
Balance Sheet & Cash Flow
As of Apr 2, 2021, cash & cash equivalents and marketable securities were $1.424 billion, compared with $1.019 billion as of Jan 1, 2021.
Cash generated by operating activities was $615.7 million compared with $485.1 million in the prior quarter.
Capital expenditures were $140.8 million in the reported quarter compared with $118.6 million in the prior quarter. This resulted in free cash flow of record $475 million, converting into a robust free cash flow margin of 41%.
In the fiscal second quarter, Skyworks paid out $83 million as dividends. The company has temporarily suspended share repurchase program to compensate for the recently announced acquisition of the infrastructure and automotive business of Silicon Laboratories (SLAB).
Notably on Apr 23, Skyworks entered into a definitive agreement with Silicon Laboratories by which Skyworks will acquire its Infrastructure & Automotive business in an all-cash asset transaction valued at $2.75 billion. The deal complements Skyworks’ connectivity portfolio and positions it well to address a combined market opportunity of $20 billion annually.
The company announced quarterly dividend of 50 cents payable on Jun 8, 2021, to shareholders as on May 18, 2021.
Wrapping Up
Skyworks is banking on its diversified portfolio strength to benefit from the rapid changes witnessed in the industry amid continued disruption from the coronavirus crisis. Rapid deployment of 5G globally is a tailwind for the company. It continues to win content at mobile and OEMs like Motorola, Samsung, OPPO, VIVO, and Xiaomi, which bodes well for the long haul.
Further, solutions of this Zacks Rank #3 (Hold) company are supporting remote work, online learning, and telemedicine and emergency response applications among others. Moreover, strong cash generation ability is encouraging. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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Skyworks' (SWKS) Q2 Earnings Beat, Stock Down on Q3 View
Skyworks Solutions (SWKS - Free Report) reported second-quarter fiscal 2021 non-GAAP earnings of $2.37 per share that beat the Zacks Consensus Estimate by 1.28% and surged 77% year over year.
Revenues of $1.172 billion surpassed the Zacks Consensus Estimate by 1.75%. Further, the top line improved 53% on a year-over-year basis.
The upside can be attributed to rapid deployment of 5G, which boosted demand for Skyworks’ mobile solutions. Mobile revenues surged 47% year over year, led by extensive content increase courtesy of ramp of 5G handsets across smartphone OEMs globally.
Also, broad markets continued to witness robust momentum. Revenues from Broad markets (contributed 33% to revenues) of $385 million, grew 67% year over year in the fiscal second quarter. The performance reflects gains from various use cases, including the adoption of technologies such as Wi-Fi 6 and 6E, uptick in 5G wireless infrastructure, and strength in automotive vertical. Ongoing momentum in audio solutions business deserves a special mention.
Shares Down On Tepid Q3 Guidance
Despite stellar fiscal second-quarter results, shares are down more than 7.5% in the pre-market trading on Apr 30, following bleak fiscal third-quarter guidance.
For third-quarter fiscal 2021, revenues are expected in the range of $1.075 billion to $1.125 billion (mid-point of $1.10 billion), representing revenue growth of 49% at the mid-point. Non-GAAP earnings are anticipated to be $2.13 per share at the mid-point of the revenue range, representing growth of 70% year over year.
Corresponding to the Zacks Consensus Estimate for revenues currently at $1.07 billion, the Zacks Consensus Estimate for earnings is pegged at $2.10 per share, for the fiscal third quarter.
Notably, Skyworks expects gross margin between 50.25% and 50.75%, and operating expenses between $159 million and $161 million.
On a year-to-date basis, shares of Skyworks have returned 29.4%, compared with the industry's rally of 23.2%.
Noteworthy Deal Wins
In the quarter under review, Skyworks’ Sky5 product portfolio continued to facilitate several premium and mid-tier 5G launches. Skyworks' solutions were utilized by Samsung, Xiaomi, OPPO, Vivo, and other Tier-1 players.
The company also partnered with NETGEAR (NTGR - Free Report) to deploy Wi-Fi 6 and 6E routers.
Also, Skyworks’ utilized wireless infrastructure portfolio, to install MIMO base stations with Ericsson (ERIC - Free Report) and Nokia.
The company’s Wi-Fi 6 engines secured gateways design wins at Nokia, Deutsche Telekom, and Altice.
Further, Volkswagen, LG and GM OnStar adopted Skyworks’ advanced telematics and infotainment offerings.
In the IoT space, Skyworks’ cellular IoT modules were selected by Quectel and Gemalto. Also, the company facilitated enhanced home security solutions at Xfinity.
The company is witnessing traction for its low-latency wireless audio platforms, supporting leading gaming headsets at Microsoft (MSFT - Free Report) and Sony. Moreover, Google Nest selected the company’s offerings for smart audio devices.
Skyworks Solutions, Inc. Price, Consensus and EPS Surprise
Skyworks Solutions, Inc. price-consensus-eps-surprise-chart | Skyworks Solutions, Inc. Quote
Operating Details
Non-GAAP gross margin expanded 60 basis points (bps) on a year-over-year basis to 50.8%. Notably, Skyworks had projected gross margin to be 50.5-51%.
Total operating expenses, as percentage of revenues, contracted 560 bps on a year-over-year basis to 17.4%.
Non-GAAP operating margin expanded 510 bps on a year-over-year basis to 37.6% in the reported quarter.
Balance Sheet & Cash Flow
As of Apr 2, 2021, cash & cash equivalents and marketable securities were $1.424 billion, compared with $1.019 billion as of Jan 1, 2021.
Cash generated by operating activities was $615.7 million compared with $485.1 million in the prior quarter.
Capital expenditures were $140.8 million in the reported quarter compared with $118.6 million in the prior quarter. This resulted in free cash flow of record $475 million, converting into a robust free cash flow margin of 41%.
In the fiscal second quarter, Skyworks paid out $83 million as dividends. The company has temporarily suspended share repurchase program to compensate for the recently announced acquisition of the infrastructure and automotive business of Silicon Laboratories (SLAB).
Notably on Apr 23, Skyworks entered into a definitive agreement with Silicon Laboratories by which Skyworks will acquire its Infrastructure & Automotive business in an all-cash asset transaction valued at $2.75 billion. The deal complements Skyworks’ connectivity portfolio and positions it well to address a combined market opportunity of $20 billion annually.
The company announced quarterly dividend of 50 cents payable on Jun 8, 2021, to shareholders as on May 18, 2021.
Wrapping Up
Skyworks is banking on its diversified portfolio strength to benefit from the rapid changes witnessed in the industry amid continued disruption from the coronavirus crisis. Rapid deployment of 5G globally is a tailwind for the company. It continues to win content at mobile and OEMs like Motorola, Samsung, OPPO, VIVO, and Xiaomi, which bodes well for the long haul.
Further, solutions of this Zacks Rank #3 (Hold) company are supporting remote work, online learning, and telemedicine and emergency response applications among others. Moreover, strong cash generation ability is encouraging. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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