A month has gone by since the last earnings report for Knowles (KN Quick QuoteKN - Free Report) . Shares have lost about 4.5% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Knowles due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Knowles Beats Earnings & Revenue Estimates in Q4

Knowles reported healthy fourth-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 $92.6 million or 98 cents per share compared with $29.6 million or 32 cents per share in the prior-year quarter. The improvement primarily resulted from an income tax benefit of $54.3 million.

In 2021, net income was $150.2 million or $1.59 per share compared with $2.9 million or 3 cents per share in 2020.

Quarterly non-GAAP net income was $46 million or 48 cents per share compared with $38.9 million or 41 cents per share in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by 4 cents.

Revenues

Quarterly revenues declined 3.7% year over year to $234.3 million due to lower demand across its Audio segment. The top line, however, surpassed the consensus estimate of $233 million.

Audio revenues fell 12.6% year over year to $176.4 million as MEMS (micro-electro-mechanical systems) microphone sales were down due to lower demand from non-mobile end markets. The segment’s gross profit was $72.8 million compared with $77.4 million in the prior-year quarter.

Precision Devices revenues increased 39.9% to $57.9 million with record bookings. The rise was driven by strong growth across a broad range of end markets. Gross profit was $28.4 million compared with $15.1 million in the year-ago quarter.

In 2021, total revenues increased 13.6% year over year to $868.1 million.

Other Quarterly Details

Cost of goods sold decreased to $133.4 million from $151.2 million year over year. Gross profit improved to $100.9 million from $92 million for a margin of 43.1% and 37.8%, respectively. Total operating expenses were $60.3 million compared with $54.4 million in the prior-year quarter. Operating income came in at $40.6 million compared with $37.6 million a year ago.

Cash Flow & Liquidity

In 2021, Knowles generated $182.1 million of cash from operating activities. Free cash flow was $133.5 million.

As of Dec 31, 2021, the company had $68.9 million in cash and cash equivalents with $70 million of long-term debt.

Q1 Outlook

Knowles has guided for the first quarter of 2022. On a continuing operations basis, it expects non-GAAP revenues in the range of $197-$203 million. Non-GAAP gross profit margin is estimated in the range of 39-41%. Non-GAAP earnings are projected in the band of 29-31 cents per share.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month.

The consensus estimate has shifted 14.29% due to these changes.

VGM Scores

At this time, Knowles has an average Growth Score of C, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. It comes with little surprise Knowles has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.