It has been about a month since the last earnings report for Skyworks Solutions (SWKS). Shares have added about 11.3% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Skyworks due for a pullback? 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 drivers.
Skyworks' Q1 Earnings and Revenues Surpass Estimates
Skyworks Solutions reported first-quarter fiscal 2021 non-GAAP earnings of $3.36 per share that beat the Zacks Consensus Estimate by 61.54% and surged 100% year over year.
Revenues of $1.51 billion surpassed the Zacks Consensus Estimate by 42.2%. Further, the top line improved 69% on a year-over-year basis.
The upside can be attributed to rapid deployment of 5G, which boosted demand for Skyworks’ mobile solutions. Also, broad markets continued to witness robust momentum.
Revenues from Broad markets (contributed 22% to revenues) of $326 million, grew 35% year over year in the fiscal first quarter.
Notable Deal Wins
In the quarter under review, Skyworks’ Sky5 product portfolio continued to facilitate several 5G launches. Skyworks' solutions were utilized by Samsung, Xiaomi, OPPO, Vivo, and other Tier-1 players.
The company also partnered with MediaTek for evolving 5G reference designs with focus on automotive and other IoT applications.
Also, Skyworks’ commenced volume shipments for 5G amplifiers and modules for supporting European base station OEMs.
The company also shipped Wi-Fi 6 solutions for access points at leading network OEMs, including Cisco, NETGEAR, TP-Link and Aruba.
Skyworks also facilitated enhanced safety systems at Volkswagen and Toyota leveraging V2X solutions. Moreover, the company’s solutions clinched design wins at Google’s Fitbit for its newest health smartwatch.
The company’s Wi-Fi 6 engines secured residential gateways design wins for CenturyLink’s latest GPON media gateway.
Itron deployed Skyworks’ offerings to power multi-standard ISM connectivity solutions for smart cities.
In the medical space, Skyworks’ vital medical applications were selected by Boston Scientific and General Electric Company.
The company also rolled out low-latency wireless audio solutions, supporting leading gaming headsets at SteelSeries and Turtle Beach.
Non-GAAP gross margin expanded 100 basis points (bps) on a year-over-year basis to 51.1%.
Research & development expenses, as percentage of revenues, contracted 390 bps on a year-over-year basis to 8.1%. Moreover, selling, general & administrative expenses, as percentage of revenues, contracted 180 bps from the year-ago quarter’s tally to 4.4%.
Non-GAAP operating margin expanded 100 bps on a year-over-year basis to 41.2% in the reported quarter.
Balance Sheet & Cash Flow
As of Jan 1, 2021, cash & cash equivalents and marketable securities were $1.019 billion, up from $980 million as of Oct 2, 2020.
Cash generated by operating activities was $485.1 million compared with $267 million in the prior quarter.
Capital expenditures were $118.6 million in the reported quarter compared with $146 million in the prior quarter.
In the fiscal first quarter, Skyworks repurchased 1.4 million shares for a total of $196 million and paid out $83 million as dividends. The company also announced a new $2 billion stock repurchase program.
Skyworks announced quarterly dividend of 50 cents payable on Mar 9, 2021, to shareholders as on Feb 16, 2021.
For second-quarter fiscal 2021, revenues are expected in the range of $1.125 billion to $1.175 billion, representing revenue growth of 50% at the mid-point. Non-GAAP earnings are anticipated to be $2.34 per share at the mid-point of the revenue range, representing growth of 75% year over year.
Notably, Skyworks expects gross margin to be 50.5-51% and operating expenses of nearly $150-152 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 44.4% due to these changes.
Currently, Skyworks has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% 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.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Skyworks 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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