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Knowles (KN) Beats Earnings and Revenue Estimates in Q2

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Knowles Corporation (KN - Free Report) reported healthy second-quarter 2021 results, wherein both the bottom line and the top line beat the Zacks Consensus Estimate.

This Itasca, IL-based company boasts a leading position across a broad range of growing end markets. It is focused on high value products to improve gross margin and operating leverage.

Net Income

On a GAAP basis, net income (from continuing operations) in the June quarter was $17.4 million or 18 cents per share against a net loss of $19.5 million or loss of 21 cents per share in the prior-year quarter. The improvement primarily resulted from an operating income.  

Non-GAAP net income came in at $30.1 million or 31 cents per share (above the high end of the company’s guidance range) against a net loss of $1.2 million or loss of 1 cent per share in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by 5 cents.

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 grew 31.3% year over year to $199.8 million (above the mid-point of the company’s guidance), driven by strong demand across its Audio and Precision Devices segments. The top line surpassed the consensus estimate of $195 million.

Audio revenues grew 43.3% year over year to $149.8 million as Hearing Health sales doubled. Knowles witnessed robust MEMS (micro-electro-mechanical systems) microphone demand in multiple end markets. The segment’s gross profit was $63.3 million compared with $30 million in the prior-year quarter.

Precision Devices revenues increased 4.8% to $50 million with record bookings. The rise highlights a recovery in the medtech market and a bolt-on acquisition completed during the quarter. Gross profit was $20.8 million compared with $18.3 million in the year-ago quarter.

Other Details

Cost of goods sold increased to $116.1 million from $103.5 million year over year. Gross profit improved to $83.7 million from $47.8 million for a margin of 41.9% and 31.4%, respectively. Total operating expenses were $61.4 million compared with $60.2 million in the prior-year quarter. Operating income came in at $22.3 million against a loss of $12.4 million a year ago.

Cash Flow & Liquidity

During the first half of 2021, Knowles generated $61 million of cash from operations. Free cash flow was $45 million.

As of Jun 30, 2021, the company had $94.2 million in cash and cash equivalents with $18.1 million of long-term operating lease liabilities.

Q3 Outlook

Knowles has guided for the third quarter of 2021. On a continuing operations basis, it expects non-GAAP revenues in the range of $227-$237 million. Non-GAAP gross profit margin is estimated in the range of 40-42%. Non-GAAP earnings are projected in the band of 38-42 cents per share.

Zacks Rank & Stocks to Consider

Knowles currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader sector are 360 DigiTech, Inc. (QFIN - Free Report) , Blucora, Inc. (BCOR - Free Report) and Seagate Technology Holdings plc (STX - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

360 DigiTech delivered a trailing four-quarter earnings surprise of 42.2%, on average.

Blucora pulled off a trailing four-quarter earnings surprise of 3.8%, on average.

Seagate delivered a trailing four-quarter earnings surprise of 11.4%, on average.