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Why Is Qorvo (QRVO) Down 5.4% Since Last Earnings Report?
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It has been about a month since the last earnings report for Qorvo (QRVO - Free Report) . Shares have lost about 5.4% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Qorvo 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.
Qorvo reported healthy third-quarter fiscal 2023 results, with the bottom and the top line surpassing the respective Zacks Consensus Estimate. However, the Greensboro, NC-based company reported year-over-year lower revenues due to weak end-market demand, elevated inventories in the post-pandemic market, underutilization of manufacturing facilities and global uncertainty.
Net Income
GAAP net loss in the reported quarter was $15.9 million or loss of 16 cents against a net income of $216.3 million or $1.95 per share in the prior-year quarter. The sharp bottom-line contraction was attributable to a significant decline in net sales.
Non-GAAP earnings in the reported quarter were $76.5 million or 75 cents per share, down from $330.4 million or $2.98 per share in the year-ago quarter. The bottom line outperformed the Zacks Consensus Estimate by 11 cents despite the year-over-year decline.
Revenues
Revenues fell to $743.3 million from $1,114 million in the year-ago quarter. However, the top line beat the Zacks Consensus Estimate of $727 million and it was well above the midpoint of management’s guidance. Despite witnessing a solid performance in broadband, automotive, defense and silicon, higher channel inventories in the post-pandemic scenario and a waning end market demand hampered company’s revenues.
Qorvo’s High Power Amplifier (HPA) witnessed a year-over-year decline as revenues amounted to $155 million in the December quarter, down from $182 million in the year-ago quarter. Weakness in the consumer-facing market, like SSDs and inventory consumption in the 5G base station market, stunted growth in defense and silicon carbide power devices.
Low demand for WIFI products and inventory consumption also induced a fall in net sales in the company’s Connectivity & Sensors Products Group. Revenue dropped to $97 million from $158 million in the corresponding quarter previous year.
The company witnessed a 36% revenue contraction from the prior-year quarter’s levels in the Advanced Cellular Products Group. Revenues declined from $775 million in the same quarter last year to $491 million this quarter. Record decline in smartphone shipment in the December quarter associated with high inventory hampered Qorvo’s top-line performance in the segment.
Other Details
On a GAAP basis, gross profit totaled $268.1 million compared with $548.1 million in the year-ago quarter. Operating expenses increased to $259.3 million from $252.1 million in the prior-year quarter.
Non-GAAP gross margin was 40.9% compared with 52.6% in the year-ago quarter. Lower factory utilization and higher inventory-related challenges are the primary factors for this reduction. Due to OpEx discipline, the timing of product development expenditure and fewer employee-related expenses, non-GAAP operating expenses in the quarter were $205.7 million, down from $214.2 million in the prior year.
Cash Flow & Liquidity
As of Dec 31, 2022, QRVO had $918.8 million in cash and cash equivalents with $2,047.7 million of long-term debt compared with respective tallies of $972.6 million and $2,047.1 million in the year-ago period. Free cash flow at the end of the December quarter was $203 million, up from the prior year’s figure of 66.5 million.
Outlook
The company anticipates that the smartphone market situation will improve in the March quarter as more customers will enter the market. It experienced a 20% decrease in total channel inventory for its components in the Android ecosystem during the December quarter alone. Management expects supply-demand adjustments will continue further during the next quarter and its business volume will recover later this year.
For fourth-quarter fiscal 2023, Qorvo expects revenues to be $600-$640 million. The company estimates a non-GAAP gross margin of around 41% and non-GAAP earnings in the range of 10-15 cents per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
The consensus estimate has shifted -116.14% due to these changes.
VGM Scores
At this time, Qorvo has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Qorvo has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
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Why Is Qorvo (QRVO) Down 5.4% Since Last Earnings Report?
It has been about a month since the last earnings report for Qorvo (QRVO - Free Report) . Shares have lost about 5.4% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Qorvo 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.
Qorvo Q3 Earnings Beat Estimates, Revenues Decline Y/Y
Qorvo reported healthy third-quarter fiscal 2023 results, with the bottom and the top line surpassing the respective Zacks Consensus Estimate. However, the Greensboro, NC-based company reported year-over-year lower revenues due to weak end-market demand, elevated inventories in the post-pandemic market, underutilization of manufacturing facilities and global uncertainty.
Net Income
GAAP net loss in the reported quarter was $15.9 million or loss of 16 cents against a net income of $216.3 million or $1.95 per share in the prior-year quarter. The sharp bottom-line contraction was attributable to a significant decline in net sales.
Non-GAAP earnings in the reported quarter were $76.5 million or 75 cents per share, down from $330.4 million or $2.98 per share in the year-ago quarter. The bottom line outperformed the Zacks Consensus Estimate by 11 cents despite the year-over-year decline.
Revenues
Revenues fell to $743.3 million from $1,114 million in the year-ago quarter. However, the top line beat the Zacks Consensus Estimate of $727 million and it was well above the midpoint of management’s guidance. Despite witnessing a solid performance in broadband, automotive, defense and silicon, higher channel inventories in the post-pandemic scenario and a waning end market demand hampered company’s revenues.
Qorvo’s High Power Amplifier (HPA) witnessed a year-over-year decline as revenues amounted to $155 million in the December quarter, down from $182 million in the year-ago quarter. Weakness in the consumer-facing market, like SSDs and inventory consumption in the 5G base station market, stunted growth in defense and silicon carbide power devices.
Low demand for WIFI products and inventory consumption also induced a fall in net sales in the company’s Connectivity & Sensors Products Group. Revenue dropped to $97 million from $158 million in the corresponding quarter previous year.
The company witnessed a 36% revenue contraction from the prior-year quarter’s levels in the Advanced Cellular Products Group. Revenues declined from $775 million in the same quarter last year to $491 million this quarter. Record decline in smartphone shipment in the December quarter associated with high inventory hampered Qorvo’s top-line performance in the segment.
Other Details
On a GAAP basis, gross profit totaled $268.1 million compared with $548.1 million in the year-ago quarter. Operating expenses increased to $259.3 million from $252.1 million in the prior-year quarter.
Non-GAAP gross margin was 40.9% compared with 52.6% in the year-ago quarter. Lower factory utilization and higher inventory-related challenges are the primary factors for this reduction. Due to OpEx discipline, the timing of product development expenditure and fewer employee-related expenses, non-GAAP operating expenses in the quarter were $205.7 million, down from $214.2 million in the prior year.
Cash Flow & Liquidity
As of Dec 31, 2022, QRVO had $918.8 million in cash and cash equivalents with $2,047.7 million of long-term debt compared with respective tallies of $972.6 million and $2,047.1 million in the year-ago period. Free cash flow at the end of the December quarter was $203 million, up from the prior year’s figure of 66.5 million.
Outlook
The company anticipates that the smartphone market situation will improve in the March quarter as more customers will enter the market. It experienced a 20% decrease in total channel inventory for its components in the Android ecosystem during the December quarter alone. Management expects supply-demand adjustments will continue further during the next quarter and its business volume will recover later this year.
For fourth-quarter fiscal 2023, Qorvo expects revenues to be $600-$640 million. The company estimates a non-GAAP gross margin of around 41% and non-GAAP earnings in the range of 10-15 cents per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
The consensus estimate has shifted -116.14% due to these changes.
VGM Scores
At this time, Qorvo has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Qorvo has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.