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Amkor Technology, Inc. (AMKR - Free Report) reported second-quarter 2017 adjusted earnings of 14 cents per share, surpassing the Zacks Consensus Estimate by 3 cents.

However, revenues of $989 million missed the Zacks Consensus Estimate of $990 million.

On a year-to-date basis, the stock has underperformed the industry it belongs to. It lost 1.6% compared with the industry’s gain of 28.3%.

During the quarter, the company completed the acquisition of Europe's largest OSATS (Outsourced Semiconductor Assembly and Test Services) company, Nanium S.A. However, the terms of the deal have not been disclosed yet.

The deal is a step on Nanium’s part to enhance the use of WLFO technology to expand its market share in the packaging market. By leveraging Nanium’s technology, Amkor will be able to strengthen its foothold in the fast-growing market of wafer-level packaging for smartphones, tablets and other applications.

Revenues

Revenues of $989 million increased 7.9% year over year. The increase was driven by strength in all its end markets.

However, revenues were below the Zacks Consensus Estimate of $990 million and at the low end of the company’s guidance of $955–$1.035 billion.

Revenues by Product Lines

The revenue mix in terms of product linesis discussed below.

Advanced Products include flip chip scale packages, wafer-level chip scale packages and flip chip ball grid array packages. It accounted for approximately 44% of second-quarter revenues. Revenues increased 12.5% sequentially and 9.4% year over year.

Mainstream products include lead frame packages, substrate-based wirebond packages and MEMS packages. It accounted for the remaining 56% of second-quarter revenues. Revenues increased 5.1% sequentially and 6.7% year over year.

Margins

Gross margin was 17.4%, up 310 basis points (bps) from the year-ago quarter. The increase was due to a favorable mix.

Non-GAAP operating expenses of $112.1 million increased 10.9% year over year. As a percentage of sales, selling, general and administrative expenses increased, while research and development expenses decreased.

As a result, pro forma operating margin was 17%, up 1,370 bps year over year.

Net Income

Amkor generated second-quarter GAAP net income of $115.5 million or 48 cents compared with $4.7 million or 2 cents in the year-ago quarter.

Balance Sheet & Cash Flow

During the reported quarter, cash flow from operations was $97 million compared with $103 million in the prior quarter. Capex was $183 million against $88 millionin the prior quarter. Free cash flow was 43 million against $17 millionin the prior quarter.

Total cash, cash equivalents and restricted cash were $660 million in the second quarter, up from $616.0 million in the prior quarter.

3Q Guidance

For the third quarter, Amkor expects revenues in the range of $1.04–$1.12 billion, up 5% to 13% sequentially. The Zacks Consensus Estimate is pegged at $1.19 billion.

Gross margin is expected within 17–20%. Earnings per share are expected in the range of 10–27 cents on a GAAP basis.

Amkor Technology, Inc. Price, Consensus and EPS Surprise

 

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

Stocks to Consider

Currently, Amkor has a Zacks Rank #3 (Hold). Some better-ranked stocks in the same space are Lam Research Corporation (LRCX - Free Report) , carrying a Zacks Rank #1 (Strong Buy), and Applied Materials (AMAT - Free Report) and Fortive Corporation (FTV - 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 4.44%, on average, in the trailing four quarters.

Applied Materials delivered a positive earnings surprise of 3.35%, on average, in the trailing four quarters.

Fortive Corporation delivered a positive earnings surprise of 5.80%, on average, in the trailing four quarters.

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