A month has gone by since the last earnings report for Skyworks Solutions (SWKS - Free Report) . Shares have lost about 4.4% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Skyworks due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Skyworks Misses on Q1 Earnings & Revenues Estimates
Skyworks Solutions reported first-quarter fiscal 2019 non-GAAP earnings of $1.83 per share, missing the Zacks Consensus Estimate by a penny. The bottom line also came below management’s guidance of $1.91 per share, at mid-point. The figure decreased 8.5% from the year-ago quarter.
Revenues of $972 million were down 7.6 % year over year and 3.6% sequentially, primarily owing to declines across mobile business.
Further, the top line missed the Zacks Consensus Estimate of $975 million. The figure also fell short of management’s guidance of $1 billion to $1.020 billion.
Mobile contributed almost 73% of revenues, while the rest came from broad markets.
However, Skyworks is benefiting from strong demand of its wireless communications engines. The company’s expanding product portfolio, growing clout in the Internet-of-Things (IoT) solutions and 5G markets are key catalysts.
During the first quarter, Skyworks launched SkyOne Ultra 3.0 suite to facilitate emerging automotive applications, in particular. The suite comprises SKYA230xx front-end modules leveraging SkyBlue enabling technology, SKYA220xxpower amplifiers, SKYA250xx Diversity Receive (DRx) and MIMO modules, SKYA21xxx suite of Low Noise Amplifiers (LNAs) and Discrete switches.
Additionally, the company powered Samsung’s Galaxy smartphones and clout smart audio solutions with multimode, multiband front-ends.
Moreover, Skyworks powered LG’smobile suite with antenna tuners, diversity receive modules, GPS devices and integrated transmit portfolio. The company also deployed 5G base station solutions for leading European infrastructure providers.
Further, the company joined hands with Square to power secure, long-range retail payment systems. The company’s Avnera Corporation acquisition is also noteworthy.The buyout gives Skyworks access to robust analog/mixed signal voice, audio and speech processing engines.
Non-GAAP gross margin contracted 40 basis points (bps) on a year-over-year basis to 51%.
Research & development (R&D) expenses as percentage of revenues increased 190 bps on a year-over-year basis to 11.2%. However, selling, general & administrative (SG&A) expenses decreased 10 bps from the year-ago quarter to 4.9%. Non-GAAP operating expenses during the reported quarter came in at $139 million or 14% of total revenues, marginally below management’s guided range of $140 million.
As a result, non-GAAP operating margin contracted 270 bps on a year-over-year basis to 36.7% in the reported quarter.
Balance Sheet & Cash Flow
As of Dec 28, 2018, cash & cash equivalents were $1.10 billion, up from $1.05 billion reported in the previous quarter.
Cash flow from operating activities was $549 million, up from $207.6 million in the previous quarter. Capital expenditure was $129 million in the quarter under review.
The company declared a quarterly dividend of 38 cents per share, payable on Mar 19, 2019. Skyworks repurchased 4 million shares for a total of $284 million. Moreover, Skyworks authorized a new $2 billion stock repurchase program during the quarter.
For second-quarter fiscal 2019, revenues are expected to be in the range of $800 million to $820 million.
Gross margin is expected in to be in the range of 50.5-51%. Operating expenses are projected to be $135 million.
Non-GAAP earnings are anticipated to be $1.43 per share, at mid-point.
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 -5.11% due to these changes.
At this time, Skyworks has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% 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.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Skyworks has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.