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Amkor (AMKR) Q1 Loss Wider Than Expected, Revenues Beat

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Amkor Technology, Inc. (AMKR - Free Report) reported first-quarter 2017 adjusted loss of 4 cents per share, greater than the Zacks Consensus Estimate of a loss of 3 cents.

However, in the last one year, shares of Amkor outperformed the Zacks categorized Electronics Semiconductors industry. While the industry gained 51.1%, the stock returned 103.8%.

Revenue

Revenues of $914 million were up 5.2% year over year. The increase was driven by strength in all its end markets, except the smartphone market which witnessed a seasonal slowdown in the first quarter.

The top line was within the company’s guidance of $860–$940 million and came in above the Zacks Consensus Estimate of $900 million.

Revenues by Product Lines

The revenue mix in terms of product linesis discussed below.

Advanced Productsinclude flip chip scale packages, wafer-level chip scale packages and flip chip ball grid array packages. It accounted for approximately 42% of first-quarter revenues. Revenues were down 15.1% sequentially but up 7.6% year over year.

Mainstream productsinclude lead frame packages, substrate-based wirebond packages and MEMS packages. It accounted for the remaining 58% of first-quarter revenues. Revenues were down 7.1% sequentially but up 3.5% year over year.

Margins

Gross margin was 15.6%, up 150 basis points (bps) from the year-ago quarter. The increase was due to higher revenues and a favorable mix.

Non-GAAP operating expenses of $118.3 million increased 17.3% year over year. As a percentage of sales, selling, general and administrative expenses decreased, while research and development expenses increased.

As a result, pro forma operating margin was 2.7%, up 20 bps year over year.

Net Income

Amkor generated first-quarter net income of ($10) million compared with ($0.875) million in the year-ago quarter. There were no one-time items in the fourth quarter. Therefore, the GAAP loss per share was the same as the pro forma loss of 4 cents compared with 0 cent in the year-ago quarter.

Balance Sheet & Cash Flow

During the reported quarter, cash flow from operations was $103 million compared with $238 million in the prior quarter. Capex was $88 million against $168 millionin the prior quarter.

Total cash, cash equivalents and restricted cash were $616 million in the first quarter, up from $551.5 billion in the prior quarter.

2Q Guidance

For the second quarter, Amkor expects revenues in the range of $955–$1.035 billion, up 5% to 13% sequentially. The Zacks Consensus Estimate is pegged at $954.04 million.

Gross margin is expected within 16–20%. Earnings per share are expected within 36–52 cents on a GAAP basis. The guidance also includes proceeds from the sale of the company’s K1 factory.

Our Take

Amkor Technology is one of the largest providers of semiconductor packaging and test services. It packages and tests integrated circuits (ICs) for chip manufacturers, fabless semiconductor companies and contract foundries.

Management sounded upbeat about the company’s progress toward closure of the Nanium acquisition. It expects to complete the acquisition of Nanium in the second quarter. The company expects the deal to strengthen its foothold in the fast-growing market of wafer-level packaging.

Though we remain concerned about weakness in the smartphone market, Amkor is well positioned in growing markets like industrial and auto and communication. Also, its high revenues and strong cash flow generation is a big positive.

Amkor Technology, Inc. Price and EPS Surprise

 

Amkor Technology, Inc. Price and EPS Surprise | Amkor Technology, Inc. Quote

Stocks to Consider

Currently, Amkor has a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry are Lam Research (LRCX - Free Report) and KLA-Tencor (KLAC - Free Report) , each carrying a Zacks Rank #1 (Strong Buy), while Applied Materials (AMAT - Free Report) , carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Lam Research delivered a positive earnings surprise of 6.14%, on average, in the trailing four quarters.

KLA-Tencor delivered a positive earnings surprise of 11.55%, on average, in the last four quarters.

Applied Materials delivered a positive earnings surprise of 3.92%, on average, in the trailing four quarters.

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