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About a month has gone by since the last earnings report for Amkor Technology, Inc. AMKR. Shares have lost about 14.9% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted 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.
Amkor Beats Q2 Earnings Estimates, Lags Revenues
Amkor reported second-quarter 2017 adjusted earnings of 14 cents per share, surpassing the Zacks Consensus Estimate by 3 cents.
However, revenues of $989 million missed the Zacks Consensus Estimate of $990 million.
On a year-to-date basis, the stock has underperformed the industry it belongs to. It lost 1.6% compared with the industry’s gain of 28.3%.
During the quarter, the company completed the acquisition of Europe's largest OSATS (Outsourced Semiconductor Assembly and Test Services) company, Nanium S.A. However, the terms of the deal have not been disclosed yet.
The deal is a step on Nanium’s part to enhance the use of WLFO technology to expand its market share in the packaging market. By leveraging Nanium’s technology, Amkor will be able to strengthen its foothold in the fast-growing market of wafer-level packaging for smartphones, tablets and other applications.
Revenues of $989 million increased 7.9% year over year. The increase was driven by strength in all its end markets.
However, revenues were below the Zacks Consensus Estimate of $990 million and at the low end of the company’s guidance of $955–$1.035 billion.
Revenues by Product Lines
The revenue mix in terms of product lines is discussed below.
Advanced Products include flip chip scale packages, wafer-level chip scale packages and flip chip ball grid array packages. It accounted for approximately 44% of second-quarter revenues. Revenues increased 12.5% sequentially and 9.4% year over year.
Mainstream products include lead frame packages, substrate-based wirebond packages and MEMS packages. It accounted for the remaining 56% of second-quarter revenues. Revenues increased 5.1% sequentially and 6.7% year over year.
Gross margin was 17.4%, up 310 basis points (bps) from the year-ago quarter. The increase was due to a favorable mix.
Non-GAAP operating expenses of $112.1 million increased 10.9% year over year. As a percentage of sales, selling, general and administrative expenses increased, while research and development expenses decreased.
As a result, pro forma operating margin was 17%, up 1,370 bps year over year.
Amkor generated second-quarter GAAP net income of $115.5 million or 48 cents compared with $4.7 million or 2 cents in the year-ago quarter.
Balance Sheet & Cash Flow
During the reported quarter, cash flow from operations was $97 million compared with $103 million in the prior quarter. Capex was $183 million against $88 million in the prior quarter. Free cash flow was 43 million against $17 million in the prior quarter.
Total cash, cash equivalents and restricted cash were $660 million in the second quarter, up from $616.0 million in the prior quarter.
For the third quarter, Amkor expects revenues in the range of $1.04–$1.12 billion, up 5% to 13% sequentially. The Zacks Consensus Estimate is pegged at $1.19 billion.
Gross margin is expected within 17–20%. Earnings per share are expected in the range of 10–27 cents on a GAAP basis.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There has been one revision lower for the current quarter. In the past month, the consensus estimate has shifted lower by 47.2% due to these changes.
Amkor Technology, Inc. Price and Consensus
Amkor Technology, Inc. Price and Consensus | Amkor Technology, Inc. Quote
At this time, Amkor's stock has a nice Growth Score of B, though it is lagging a lot on the momentum front with an F. 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 A. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for value investors than growth investors.
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Notably, the stock has a Zacks Rank #3 (Hold). We expect in-line returns from the stock in the next few months.
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