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Qorvo (QRVO) Tops Q2 Earning Estimates Despite Lower Revenues

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Premier semiconductor manufacturer Qorvo, Inc. (QRVO - Free Report) reported solid second-quarter fiscal 2023 results driven by secular growth drivers in 5G, IoT connectivity, defense and power. Both the bottom line and the top line surpassed the respective Zacks Consensus Estimate, backed by the strength of the business model and expansion of its regional footprint.

Net Income

GAAP net income in the reported quarter was $188.6 million or $1.82 per share compared with $319.2 million or $2.84 per share in the prior-year period. The decline was primarily due to top-line contraction.

Non-GAAP earnings in the reported quarter were $276.2 million or $2.66 per share, down from $384.5 million or $3.42 per share in the year-ago quarter. Despite the year-over-year decline, the bottom line exceeded management guidance and beat the Zacks Consensus Estimate by 11 cents.

Qorvo, Inc. Price, Consensus and EPS Surprise Qorvo, Inc. Price, Consensus and EPS Surprise

Qorvo, Inc. price-consensus-eps-surprise-chart | Qorvo, Inc. Quote

Quarter Details

Revenues fell to $1,158.1 million from $1,255.2 million in the year-ago quarter. The year-over-year decline was due to global macroeconomic uncertainty and soft end-market demand. However, the top line exceeded the management guidance and beat the Zacks Consensus Estimate of $1,135 million.

Non-GAAP gross margin was 49.2% compared with 52.4% in the year-ago quarter owing to higher inventory-related charges and planned reduction in factory utilization. Non-GAAP income from operations was $337.7 million, down from $435.4 million.

Balance Sheet

As of Oct 1, 2022, QRVO had $911.6 million in cash and cash equivalents with $2,047.4 million of long-term debt. Free cash flow at the end of the quarter was $220.4 million. Capital expenditure remains concentrated in areas where the company sees continued demand for differentiated products.

Outlook

For third-quarter fiscal 2023, Qorvo expects revenues to be in the range of $700–$750 million, driven by continued weakness across end markets and acute inventory correction at Android-based smartphone customers. The company expects non-GAAP gross margin between 43% and 44% and non-GAAP earnings in the range of 50–75 cents per share.

Zacks Rank & Stocks to Consider

Qorvo currently has a Zacks Rank #3 (Hold).

A better-ranked stock in the broader industry is Sierra Wireless, Inc. , carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Sierra Wireless has a long-term earnings growth expectation of 15% and delivered an earnings surprise of 229.9%, on average, in the trailing four quarters. Over the past year, the stock has gained 80.3%. Earnings estimates for the current year have moved up 4400% since October 2021. Sierra Wireless continues to launch innovative products for business-critical operations that require high security and optimum 5G performance.

InterDigital, Inc. (IDCC - Free Report) , sporting a Zacks Rank #1, is another key pick for investors. It has a long-term earnings growth expectation of 25% and delivered a stellar earnings surprise of 81.9%, on average, in the trailing four quarters.

InterDigital is focused on pursuing agreements with unlicensed customers in the handset and consumer electronics markets. The company aims to become a leading designer and developer of technology solutions and innovation for the mobile industry, IoT and allied technology areas. InterDigital’s global footprint, diversified product portfolio and ability to penetrate different markets are impressive.

Comtech Telecommunications Corp. (CMTL - Free Report) , sporting a Zacks Rank #1, is another key pick. Headquartered in Melville, NY, the company is a leading global provider of next-generation 911 emergency systems and secure wireless communications technologies to commercial and government customers.    

Comtech’s key satellite earth station modems incorporate forward error correction and bandwidth compression technologies, which enable its customers to optimize their satellite networks by either reducing their satellite transponder lease costs or increasing data throughput. It holds leadership positions in the market for high-throughput modems used in cellular backhaul.


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