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Cirrus Logic (CRUS) Down 22.4% 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 22.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is 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 Q4 Results

Cirrus Logic delivered fourth-quarter fiscal 2019 non-GAAP earnings per share of 37 cents, which topped the Zacks Consensus Estimate of 11 cents but were much lower than the year-ago quarterly figure of 51 cents.

Total revenues of $240.4 million surpassed the Zacks Consensus Estimate of $219 million. However, the top line was down 20.7% year over year and 25.9% sequentially due to reduction in sales of portable audio products shipping in smartphones.

However, rise in amplifier sales at Android customers was a positive.

Quarterly Details

Segment wise, portable audio product revenues (86% of total revenues) came in at $207.1 million, down 21% year over year. Non-portable audio and other products (14%) decreased 17.5% to $33.3 million.

Per the management, the company significantly expanded its penetration in the Android market. Cirrus Logic gained a second customer, which contributed more than 10% to revenues in the fourth quarter, backed by acceleration in sales of boosted amplifiers. The company is also gaining momentum from haptic driver product line as it forays into the adjacent markets beyond audio and voice.

Cirrus Logic’s largest customer, apparently Apple, accounted for 66% of sales for the reported quarter. Another one delivered 15% of sales.

Non-GAAP gross profit was $124.9 million, which declined 18.4% on a year-over-year basis. Gross margin, however, grew 150 basis points (bps) to 52%.

Cirrus Logic’s non-GAAP operating expenses fell 3.6% to $103 million owing to cut in the discretionary spending and deferring expenses.

Non-GAAP operating income of $22 million slumped 52.5%. Moreover, non-GAAP operating margin contracted 600 bps from the year-ago quarter to 9%.

Balance Sheet and Cash Flow

The company exited the quarter with cash and cash equivalents of $216.1 million compared with $219.3 million at the end of the earlier reported quarter.

Accounts receivables were $120.7 million compared with $142.1 million in the last reported quarter. Notably, the company did not have any long-term debt during the quarter under review.

The company repurchased 258K shares worth $10 million during the quarter under discussion. As of Mar 30, 2019, it has $240 million remaining under share repurchase authorization.

Outlook

The company expects first-quarter fiscal 2020 revenues between $200 million and $240 million.

Its growing share in the Android market and new product development activities are expected to be key drivers in the long run. The company’s strong product portfolio comprising audio, voice and other adjacent markets, such as haptics is a positive.

Management is optimistic that rising demand for the complex analog and digital signal processing will drive the company’s long-term performance.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 63.33% due to these changes.

VGM Scores

Currently, Cirrus Logic has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

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

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Cirrus Logic has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.


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