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Cirrus Logic (CRUS) Down 7% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Cirrus Logic (CRUS - Free Report) . Shares have lost about 7% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Cirrus Logic due for a breakout? 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 drivers.

Cirrus Logic Reports Q2 Results

Cirrus Logic reported better-than-expected top line and bottom-line results for the second quarter of fiscal 2019, surpassing the Zacks Consensus Estimate.

The company’s non-GAAP earnings per share of $1.08 topped the Zacks Consensus Estimate of 74 cents. However, the figure declined 20.6% year over year due to lower revenues and higher operating expenses.

Total revenues of $366.3 million surpassed the Zacks Consensus Estimate of $330 million. However, the top line was down 14.1% year over year. Revenues, however, exceeded the expectations of the company as orders for several portable products were preponed to the fiscal second quarter from the fiscal third quarter.

Nonetheless, growing momentum of demand for features for enhanced user experience across the company’s target markets remained a positive.

Quarter Details

Segment wise, portable audio product revenues (88.5% of the total revenues) came in at $324 million, down 15.1% year over year.  Non-portable audio and other products (11.5%) decreased 3.4% to $42.3 million.

During the quarter, Cirrus Logic shipped a haptic driver and two audio amplifiers to its first high-end Android smartphone customer in North America.

Moreover, the company also increased penetration of boosted amplifiers in high-end and mid-range smartphones. It also supplied a 55-nanometer amplifier to a top customer.

Non-GAAP gross profit was $185.3 million, which decreased 12.4% on a year-over-year basis. Gross margin, however, grew 90 basis points (bps) to 50.6%.

Cirrus Logic’s non-GAAP operating expenses increased 7.1% to $103.7 million.

Non-GAAP operating income of $81.6 million declined 28.9%. Moreover, non-GAAP operating margin contracted 500 bps from the year-ago quarter to 22%.

On a non-GAAP basis, Cirrus Logic reported net income of $67.1 million compared with $89.9 million in the year-ago quarter. This marked a decline of 25.4%.

Balance Sheet and Cash Flow

The company exited the quarter with cash and cash equivalents of $195.9 million compared with $186.5 million at the end of the previous quarter. Accounts receivables were $206.8 million compared with $126.6 million last quarter. Notably, it did not have any long-term debt during the quarter.

Guidance

Cirrus Logic provided guidance for third-quarter fiscal 2019.

The company expects revenues between $360 million and $400 million.

The company is optimistic about its diverse product portfolio and expects to return to growth in fiscal 2020.

Demand for handsets, which are built using the company’s technology, and the timing of smartphone launches anticipated at the end of the fiscal year are expected to influence the results for the remainder of fiscal 2019.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -14.87% due to these changes.

VGM Scores

Currently, Cirrus Logic has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. It's no surprise Cirrus Logic has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.




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