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Skyworks (SWKS) to Report Q4 Earnings: What's in the Offing?

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Skyworks Solutions Inc. (SWKS - Free Report) is set to release fourth-quarter fiscal 2018 results on Nov 8. The company beat the Zacks Consensus Estimate in the trailing four quarters, recording average positive surprise of 3.59%.

In the last reported quarter, the company’s non-GAAP earnings of $1.64 per share surpassed the Zacks Consensus Estimate by a nickel. The figure improved 4.5% from the year-ago quarter.

Revenues of $894.3 million were down 0.7% year over year, primarily owing to weakness in mobile business and loss of ZTE revenues (which usually contributes $25-$30 million per quarter). However, the revenue figure was in line with the Zacks Consensus Estimate.

Notably, Skyworks is benefiting from its portfolio strength, particularly in the 5G applications and Internet-of-Things (IoT) market.

Guidance & Estimates

For fourth-quarter fiscal 2018, revenues are expected to increase 11-13% sequentially or $1 billion at mid-point. Management expects couple of million dollars in revenues from ZTE. Non-GAAP earnings are expected to be $1.91 per share, up 16% sequentially, at mid-point.

The Zacks Consensus Estimate for earnings is currently pegged at $1.91 per share, reflecting a year-over-year increase of 4.9%. Further, Zacks Consensus Estimate for revenues is pegged at $1 billion, up roughly 1.7% from the year-ago quarter.

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

Factors to Influence Q4 Results

The emergence of connected homes, autonomous vehicles, artificial intelligence (AI), augmented reality, wearables and network infrastructure presents significant growth opportunity for Skyworks’ connectivity solutions.

Recently, Skyworks unveiled solutions from its Sky5 platform that has been authorized to support wireless 5G networks. Further, the company continues to win content at mobile and OEMs like Huawei, Samsung, Oppo, Vivo, LG and Nokia. Notably, the upcoming 5G upgrade cycle is also a major positive.

The company also launched street lighting modules with Philips for smart cities and introduced networking products supporting AT&T/DIRECTV routers.

Skyworks also launched high-precision GPS functionality improving ride-sharing, mobile payment and fleet management services in the to-be-reported quarter. Additionally, the company inked partnership with Sierra Wireless on LTE CAT-12 data cards for M2M applications.

Notably, during the last reported quarter, mobile contributed almost 70% of revenues, while the rest came from broad markets. Further, China contributes almost 25-30% of revenues, majority of which is contributed by mobile.

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

In terms of competition, management believes that Qualcomm (QCOM), despite pursuing programs that Skyworks is already a part of, is not a major threat. Moreover, the trade war between the United States and China will not have much impact on the company’s top-line.

However, the near-term softness witnessed across leading smart-phone customers remains a headwind. Overdependence on Apple (AAPL - Free Report) for revenue generation continues to add to the woes.

Nonetheless, management remains optimistic on Skyworks’ expanding product portfolio and new customer wins to keep revenues churning and help its gross margins improve.

Skyworks Solutions, Inc. Price and EPS Surprise


Skyworks Solutions, Inc. Price and EPS Surprise | Skyworks Solutions, Inc. Quote

What the Zacks Model Unveils

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 has a Zacks Rank #4 (Sell) and an Earnings ESP of 0.00%, which makes surprise prediction difficult.

Stocks That Warrant a Look

Here are some stocks that you may want to consider as our model shows these have the right combination of elements to deliver an earnings beat in its upcoming release.

Adobe Systems Incorporated (ADBE - Free Report) has an Earnings ESP of +0.19% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Activision Blizzard, Inc (ATVI - Free Report) has an Earnings ESP of +1.75% and a Zacks Rank #3

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