It has been about a month since the last earnings report for Amkor Technology (AMKR). Shares have lost about 13% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Amkor Technology 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.
Amkor Q2 Loss Narrower Than Estimated, Revenues Beat
Amkor Technology, Inc. reported second-quarter 2019 adjusted loss of 4 cents per share, narrower than the Zacks Consensus Estimate of a loss of 7 cents.
Revenues of $895 million beat the Zacks Consensus Estimate of $890 million and were within the company’s guided range of $850-$930 million. However, revenues were almost flat sequentially but down 16% year over year.
The company has been making efforts to channelize its resources in important growth areas like MEMS and sensors business, which focus on mobile and automotive applications.
The company remains optimistic about automotive business growth. Per market forecast, the automotive market will grow in high single digits in the coming years. The growth is expected to be driven by increasing electronic content. Given attractive value proposition for automotive customers, Amkor is poised to benefit going ahead.
The company also expects mobile revenue to be up almost 25% sequentially in the upcoming quarter, due to production ramps and flagship smartphones.
Revenues by Product Lines
The revenue mix in terms of product lines is discussed below.
Advanced Products, which include flip chip scale packages, wafer-level chip scale packages and flip chip ball grid array packages, accounted for approximately 48% of second-quarter revenues. Revenues increased 2.6% sequentially but decreased 12.7% year over year.
Mainstream Products, which include lead frame packages, substrate-based wire bond packages and MEMS packages, accounted for the remaining 52% of second-quarter revenues. Revenues decreased 17.2% sequentially and 18.9% year over year.
Per the press release, gross margin of 13.8% was at the high end of the guided range, primarily due to favorable product mix. However, gross margins were up 30 basis points (bps) sequentially but down 210 bps from the year-ago quarter.
Operating expenses of $100.9 million decreased 12.8% year over year due to decreased employee compensation costs and reduced discretionary spending.
As a percentage of sales, both selling, general & administrative, as well as research & development expenses slightly increased from the year-ago quarter.
As a result, operating margin was 2.5%, down 260 bps from the prior-year quarter.
Balance Sheet & Cash Flow
Total cash, cash equivalents and restricted cash were $5.5 billion, up from $1.06 billion in first-quarter 2019.
For the second quarter, Amkor expects revenues in the range of $990 million-$1.07 billion, up 15% sequentially, driven by gains in the mobile communications and consumer markets. Gross margin is expected within 12-16%. Earnings per share are expected in the range of (3)-17 cents on a GAAP basis.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -50% due to these changes.
Currently, Amkor Technology has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, 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.
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 #3 (Hold). We expect an in-line return from the stock in the next few months.
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