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Why Is M/A-Com (MTSI) Down 10.5% Since Last Earnings Report?

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It has been about a month since the last earnings report for M/A-Com (MTSI - Free Report) . Shares have lost about 10.5% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is M/A-Com 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 catalysts.

MACOM reports In-Line Q4 Earnings, Lags on Revenues

MACOM Technology Solutions Holdings, Inc. delivered fiscal fourth-quarter 2018 non-GAAP earnings of 16 cents per share, inline with the Zacks Consensus Estimate. The figure increased 23.1% on a sequential basis but declined drastically from the year-ago quarter.

The sequential increase in earnings was driven by prudent cost management.

Adjusted revenues decreased 9.1% year over year but increased 9.7% on a sequential basis to $151.2 million, missing the Zacks Consensus Estimate of $153 million. However, the figure came within the guided range.

Operating Details

In fiscal fourth-quarter 2018, non-GAAP gross margin came in at 54.8%, contracting 330 basis points (bps) on a year-over-year basis and 120 bps sequentially.

Non-GAAP operating expenses, as a percentage of revenues, came in at 42.4%,which expanded 710 bps from the prior-year quarter but contracted 220 bps from the fiscal third quarter.

Adjusted operating margin came in at 12.3%, which expanded 1050 bps from the prior-year quarter and 90 bps from the fiscal third quarter.

Adjusted EBITDA was $26.1 million, down from $47.3 million in the year-ago quarter.  However, the figure was up from $24.1 million in the fiscal third quarter.

Balance Sheet & Cash Flow

At the end of fiscal fourth quarter, cash equivalents and short-term investments were $192.9 million compared with $182.9 million in the fiscal third quarter. Inventories were $122.8 million, down from $122.9 million a year ago.

Long-term debt obligations, excluding current portion, were $658.4 million in the fiscal fourth quarter.

Guidance

For fiscal first-quarter 2019, MACOM expects adjusted revenues between $150 million and $156 million. 

The company’s earnings are anticipated in the range of 18-22 cents per share. 

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 88.23% due to these changes.

VGM Scores

Currently, M/A-Com has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. 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 these revisions looks promising. Notably, M/A-Com has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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