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Knowles (KN) Beats Earnings and Revenue Estimates in Q3

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

The company is focused on delivering high-value, differentiated solutions to a diverse set of growing end markets to expand its gross margin.

Net Income

On a GAAP basis, net income (from continuing operations) in the quarter was $27.7 million or 29 cents per share compared with $5.6 million or 6 cents per share in the prior-year quarter. The improvement primarily resulted from a higher operating income.

Non-GAAP net income was $43 million or 45 cents per share (above the high end of the company’s guidance) compared with $22.3 million or 24 cents per share in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by 6 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 13.2% year over year to $233 million (above the mid-point of the company’s guidance), driven by solid demand across its Audio and Precision Devices segments. The top line surpassed the consensus estimate of $232 million.

Audio revenues grew 7.8% year over year to $177.7 million as Hearing Health sales increased on strong end-market demand, and MEMS (micro-electro-mechanical systems) microphone sales grew primarily driven by demand from non-mobile end markets. The segment’s gross profit was $71.9 million compared with $58.9 million in the prior-year quarter.

Precision Devices revenues increased 34.9% to $55.3 million with record bookings. The rise was driven by strong growth across a broad range of end markets. Gross profit was $25.6 million compared with $16.7 million in the year-ago quarter.

Other Details

Cost of goods sold increased to $136.1 million from $130.6 million year over year. Gross profit improved to $96.9 million from $75.2 million for a margin of 41.6% and 36.5%, respectively. Total operating expenses were $62.3 million compared with $61.6 million in the prior-year quarter. Operating income came in at $34.6 million compared with $13.6 million a year ago.

Cash Flow & Liquidity

During the first nine months of 2021, Knowles generated $116.6 million of cash from operating activities. Free cash flow was $88.4 million.

As of Sep 30, 2021, the company had $140 million in cash and cash equivalents with $171.8 million in current maturities of long-term debt.

Q4 Outlook

Knowles has guided for the fourth quarter of 2021. On a continuing operations basis, it expects non-GAAP revenues in the range of $230-$235 million. Non-GAAP gross profit margin is estimated in the range of 40-42%. Non-GAAP earnings are projected in the band of 43-45 cents per share. It expects a favorable product mix and strong operating leverage to drive earnings above the year-ago period.

Zacks Rank & Stocks to Consider

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

Some better-ranked stocks in the broader industry are Ooma, Inc. (OOMA - Free Report) , Ubiquiti, Inc. (UI - Free Report) , and SeaChange International, Inc. (SEAC - Free Report) . While Ooma sports a Zacks Rank #1 (Strong Buy), Ubiquiti and SeaChange carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Ooma delivered a trailing four-quarter earnings surprise of 55.2%, on average.

Ubiquiti pulled off a trailing four-quarter earnings surprise of 20.5%, on average.

SeaChange delivered a trailing four-quarter earnings surprise of 28.9%, on average.