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Skyworks (SWKS) Q1 Earnings: What Lies Ahead for the Stock?

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Skyworks Solutions Inc. (SWKS - Free Report) is set to release first-quarter fiscal 2018 results on Feb 5. The company beat the Zacks Consensus Estimate in the trailing four quarters, with an average positive surprise of 3.36%.

Last quarter, Skyworks reported non-GAAP earnings of $1.82 per share, which beat the Zacks Consensus Estimate by 7 cents. The figure improved 24.1% from the year-ago quarter and 25.1% on a sequential basis.

Revenues of $984.6 million were up 17.9% year over year and 9.3% sequentially. The figure surpassed the Zacks Consensus Estimate of $981 million. The strong results reflected Skyworks’ growing clout in the connectivity solutions and 5G markets. The company’s solutions continue to capture strategic design wins across the broad markets.

Guidance & Estimates

For first-quarter fiscal 2018, revenues are expected to increase 15% year over year to $1.050 billion. Non-GAAP earnings are anticipated to be $1.91 per share, up 19% on a year-over-year basis.

The Zacks Consensus Estimate for the quarter is pegged at $1.91 per share, reflecting a year-over-year decrease of 18.6%. Further, Zacks Consensus Estimate for revenues is pegged at $1.05 billion, up roughly 14.9% from the year-ago quarter.

Skyworks’ shares have returned 12.7% in the past year, substantially outperforming the industry’s rally of 4.1%.

Let’s see how things are shaping up for this announcement.

Aspects to Influence Q1 Results

Skyworks noted that broad markets represented 26% of total revenues, while the mobile market constituted 64%. Power Amplifiers accounted for 10% of the revenues.

Across the broad markets, the company delivered fully integrated Zigbee and ISM modules for Bosch home security and Cisco Systems’s smart lighting systems.

Skyworks also initiated volume production of in-vehicle telematics at Hyundai and launched wireless networking engines within DirecTV's 4K Genie receivers. The company also supported Sonos' latest hi-fi speaker featuring Inc.’s (AMZN - Free Report) virtual assistant Alexa.

Moreover, Skyworks launched next-generation 802.11ax Wi-Fi solutions, enabling a fourfold increase in speed and supporting up to 50 simultaneous users. The company also unveiled high-power solutions with leading base station customers for 5G MIMO deployments.

The company recently unveiled a new suit of network-driven solution that supports wireless 5G networks called Sky5.

Sky5 solution is a platform that deals with revolutionary 5G applications. We believe that, Skyworks’ expanding product portfolio has the potential to address this rapidly growing need.

Skyworks also won contract at DJI for virtual reality and drone applications. The company also supplied precision GPS and antenna tuning for Fitbit Inc.'s newest smart watches. Skyworks’ supported most of the major mobile manufacturers in the quarter including Samsung, Huawei, Oppo, Vivo, Xiaomi and Motorola.

All these factors bode well for the company and are likely to act as a tailwind in the to-be reported quarter.

However, intensifying competition is a concern.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. The sell-rated stocks (Zacks Rank #4 or 5) are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Skyworks carries a Zacks Rank #4 (Sell) and its Earnings ESP is +0.34%.

Stocks With Favorable Combination

Here are a couple of companies which, as per our model, have the right combination of elements to post an earnings beat this quarter:

NVIDIA Corporation (NVDA - Free Report) , with an Earnings ESP of +4.71% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Square, Inc. (SQ - Free Report) , with an Earnings ESP of +1.84% and a Zacks Rank of 2.

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