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Why Is Qorvo (QRVO) Up 12.9% Since Last Earnings Report?
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A month has gone by since the last earnings report for Qorvo (QRVO - Free Report) . Shares have added about 12.9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Qorvo due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Qorvo reported relatively healthy second-quarter fiscal 2024 results, with the top and bottom lines surpassing the respective Zacks Consensus Estimate.
The company reported a revenue contraction year over year due to a net sales drop in the High-Performance Analog (HPA) and Connectivity and Sensors Group (CSG) verticals. Despite major improvements in channel inventory, the persistence of low demand in some key end markets impacted the top-line growth.
However, the top line surpassed the midpoint of the revenue guidance by $103 million. Qorvo secured new design wins across all the verticals. The company is witnessing a growing shipment of highly integrated modules for Android smartphones. Strength in automotive, defense and aerospace business are positive factors.
Net Income
On a GAAP basis, the company registered a net income of $97.5 million or 99 cents per share compared with a net income of $188.6 million or $1.82 per share in the prior-year quarter. Higher operating expenses and lower revenues year over year led to a decline in net income.
Non-GAAP net income was $235.5 million or $2.39 per share, down from $276.2 million or $2.66 per share in the year-ago quarter. The bottom line surpassed the Zacks Consensus Estimates by 62 cents.
Revenues
Net sales during the quarter declined to $1,103.5 million from $1,158.1 million in the prior-year quarter. Despite significant improvement in inventory levels, demand in various end markets was yet to fully recover, which impeded revenues. Macroeconomic headwinds also impacted the top line. Nevertheless, the company secured major deal wins for its ultra-wide band portfolio in a flagship Android smartphone and a leading German automotive manufacturer. The top line beat the Zacks Consensus Estimate of $1,002 million.
HPA contributed $149.8 million in revenues, down from $228.1 million in the year-ago quarter. Net sales fell short of the Zacks Consensus Estimate of $164.5 million. The top line in this segment was impacted by inventory correction among base station customers. Backed by its comprehensive portfolio in power management, the company secured various design wins in SSDs, power tools and appliances. The growing adoption of DOCSIS 4.0 is also driving the top line. Strength in radar systems, low earth orbit satellites and unmanned vehicles like drones are tailwinds. The company’s initiatives to venture into new markets like electric vehicles, solar inverters and data centers are positive.
Revenues from CSG were $103.6 million compared with $143.4 million in the year-earlier quarter. The top line missed the Zacks Consensus Estimate of $114.8 million. However, the company registered sequential growth, driven by healthy demand trends in various end markets, including automotive, connected home, enterprise and industrial. Rising adoption of ultra-wideband and the transition to Wi-Fi 6E and Wi-Fi 7 partially supported the top line.
Net sales in Advance Cellular Group (ACG) were $850.1 million, up 8.1% year over year, backed by healthy demand for Qorvo components across the Android smartphone ecosystem. The top line beat the Zacks Consensus Estimate of $721.4 million.
Other Details
On a GAAP basis, gross profit declined to $489.7 million from $538.9 million, with respective margins of 44.4% and 46.5%. However, the company reported solid sequential growth backed by revenue improvement and a favorable product mix. Non-GAAP gross margin was 47.6% compared with 49.2% reported in the prior-year quarter. Non-GAAP operating income stood at $279.4 million, down from $337.7 million in the year-ago quarter.
Cash Flow & Liquidity
As of Sep 30, 2023, QRVO had $706.8 million in cash and cash equivalents with $2,048.6 million of long-term debt. The company generated $93 million in net cash from operating activities, with a free cash flow of $64.4 million. During the quarter, Qorvo repurchased $100 million worth of shares at an average price of $103.
Outlook
For third-quarter fiscal 2024, the company approximated revenues at about $1 billion (+/- $25 million). Non-GAAP gross margin is estimated in the range of 43-44%. Non-GAAP earnings per share are likely to be $1.65 at the midpoint of the revenue guidance. The company expects non-GAAP operating expenses to be in the range of $235-$240 million in the December quarter.
Qorvo is actively investing in diverse businesses to broaden its portfolio and enhance market exposure. Management expects the decline in channel inventory to continue in the upcoming quarters. Transition to advanced 5G smartphones that include additional transmit, receive and satellite bands favors Qorvo’s ACG portfolio and boasts a significant growth opportunity.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
VGM Scores
Currently, Qorvo has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, 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 upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Qorvo has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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Why Is Qorvo (QRVO) Up 12.9% Since Last Earnings Report?
A month has gone by since the last earnings report for Qorvo (QRVO - Free Report) . Shares have added about 12.9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Qorvo due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Qorvo Q2 Earnings Beat Estimates Despite Lower Revenues
Qorvo reported relatively healthy second-quarter fiscal 2024 results, with the top and bottom lines surpassing the respective Zacks Consensus Estimate.
The company reported a revenue contraction year over year due to a net sales drop in the High-Performance Analog (HPA) and Connectivity and Sensors Group (CSG) verticals. Despite major improvements in channel inventory, the persistence of low demand in some key end markets impacted the top-line growth.
However, the top line surpassed the midpoint of the revenue guidance by $103 million. Qorvo secured new design wins across all the verticals. The company is witnessing a growing shipment of highly integrated modules for Android smartphones. Strength in automotive, defense and aerospace business are positive factors.
Net Income
On a GAAP basis, the company registered a net income of $97.5 million or 99 cents per share compared with a net income of $188.6 million or $1.82 per share in the prior-year quarter. Higher operating expenses and lower revenues year over year led to a decline in net income.
Non-GAAP net income was $235.5 million or $2.39 per share, down from $276.2 million or $2.66 per share in the year-ago quarter. The bottom line surpassed the Zacks Consensus Estimates by 62 cents.
Revenues
Net sales during the quarter declined to $1,103.5 million from $1,158.1 million in the prior-year quarter. Despite significant improvement in inventory levels, demand in various end markets was yet to fully recover, which impeded revenues. Macroeconomic headwinds also impacted the top line. Nevertheless, the company secured major deal wins for its ultra-wide band portfolio in a flagship Android smartphone and a leading German automotive manufacturer. The top line beat the Zacks Consensus Estimate of $1,002 million.
HPA contributed $149.8 million in revenues, down from $228.1 million in the year-ago quarter. Net sales fell short of the Zacks Consensus Estimate of $164.5 million. The top line in this segment was impacted by inventory correction among base station customers. Backed by its comprehensive portfolio in power management, the company secured various design wins in SSDs, power tools and appliances. The growing adoption of DOCSIS 4.0 is also driving the top line. Strength in radar systems, low earth orbit satellites and unmanned vehicles like drones are tailwinds. The company’s initiatives to venture into new markets like electric vehicles, solar inverters and data centers are positive.
Revenues from CSG were $103.6 million compared with $143.4 million in the year-earlier quarter. The top line missed the Zacks Consensus Estimate of $114.8 million. However, the company registered sequential growth, driven by healthy demand trends in various end markets, including automotive, connected home, enterprise and industrial. Rising adoption of ultra-wideband and the transition to Wi-Fi 6E and Wi-Fi 7 partially supported the top line.
Net sales in Advance Cellular Group (ACG) were $850.1 million, up 8.1% year over year, backed by healthy demand for Qorvo components across the Android smartphone ecosystem. The top line beat the Zacks Consensus Estimate of $721.4 million.
Other Details
On a GAAP basis, gross profit declined to $489.7 million from $538.9 million, with respective margins of 44.4% and 46.5%. However, the company reported solid sequential growth backed by revenue improvement and a favorable product mix. Non-GAAP gross margin was 47.6% compared with 49.2% reported in the prior-year quarter. Non-GAAP operating income stood at $279.4 million, down from $337.7 million in the year-ago quarter.
Cash Flow & Liquidity
As of Sep 30, 2023, QRVO had $706.8 million in cash and cash equivalents with $2,048.6 million of long-term debt. The company generated $93 million in net cash from operating activities, with a free cash flow of $64.4 million. During the quarter, Qorvo repurchased $100 million worth of shares at an average price of $103.
Outlook
For third-quarter fiscal 2024, the company approximated revenues at about $1 billion (+/- $25 million). Non-GAAP gross margin is estimated in the range of 43-44%. Non-GAAP earnings per share are likely to be $1.65 at the midpoint of the revenue guidance. The company expects non-GAAP operating expenses to be in the range of $235-$240 million in the December quarter.
Qorvo is actively investing in diverse businesses to broaden its portfolio and enhance market exposure. Management expects the decline in channel inventory to continue in the upcoming quarters. Transition to advanced 5G smartphones that include additional transmit, receive and satellite bands favors Qorvo’s ACG portfolio and boasts a significant growth opportunity.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
VGM Scores
Currently, Qorvo has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, 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 upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Qorvo has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.