A month has gone by since the last earnings report for Amkor Technology (AMKR). Shares have added about 8.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Amkor Technology due for a pullback? 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.
Amkor’s Q1 Earnings and Revenues Surpass Estimates
Amkor Technology, Inc. reported first-quarter 2020 earnings of 26 cents per share, beating the Zacks Consensus Estimate by 13 cents. The figure significantly improved from the year-ago quarter but declined 36.6% sequentially.
Revenues of $1.15 billion surpassed the Zacks Consensus Estimate by 6.4%. The figure improved 29% year over year but was down 2.2% sequentially.
The company witnessed solid demand for advanced packaging technologies in consumer and mobile communication markets during the reported quarter, which in turn drove the top line.
Management believes that the coronavirus will likely impact the company’s near-term demand. However, it does not expect any significant negative impact on long-term growth of the semiconductor industry.
Amkor remains optimistic about growth opportunities associated with high-performance computing, 5G and digital automotive, which in turn are expected to strengthen its market position.
Revenues in Terms of Product Lines
Advanced Products — which includes flip chip scale packages, wafer-level chip scale packages and flip chip ball grid array packages — accounted for approximately 61% of first-quarter revenues. Revenues improved 67.1% year over year to $705 million.
Mainstream Products — which includes lead frame packages, substrate-based wire bond packages and MEMS packages — accounted for the remaining 39% of first-quarter revenues. Revenues declined 5.3% year over year to $448 million.
The company operates in four end markets, namely Communications, Computing, Consumer and Automotive, industrial and other.
In the mobile communications market, sales remained strong in the first quarter, driven by spring phone launches. Also, sales in computing and consumer markets remained solid.
However, sales in automotive and industrial markets were down from the prior-year quarter.
Amkor’s advanced SiP technology continues to gain momentum. Revenues from advanced SiP more than doubled year over year in the quarter.
Per management, gross margin of 16.4% expanded 290 basis points (bps) from the year-ago quarter.
Operating expenses of $104.8 million decreased 2.3% year over year due to disciplined discretionary spending and manufacturing cost control. As a percentage of revenues, both selling, general and administrative, as well as research and development expenses declined from the year-ago quarter.
Operating margin was 7.3%, which expanded 580 bps from the prior-year quarter.
As of Mar 31, 2020, cash equivalents and restricted cash were $942.1 million compared with $895.6 million on Dec 31, 2019.
Further, long-term debt was $1.37 billion at the end of the first quarter compared with $1.3 billion at fourth quarter-end.
For second-quarter 2020, Amkor expects revenues in the range of $1-$1.1 billion, indicating 17% year-over-year growth but 9% sequential decline.
Gross margin is expected in the range of 9.5-13.5%.
Further, earnings are expected between ($0.13) to 8 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 -300% due to these changes.
At this time, Amkor Technology 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 A on the value side, putting it in the top 20% 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 broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Amkor Technology 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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