Amkor Technology, Inc. AMKR reported second-quarter 2020 earnings of 23 cents per share against the Zacks Consensus Estimate of a loss of $0.02. The figure significantly improved from the year-ago quarter but declined sequentially.
Revenues of $1.17 billion surpassed the Zacks Consensus Estimate by 11.7%. The figure improved 31% year over year and 1.7% sequentially.
The company witnessed solid demand for advanced packaging technologies in consumer and communication markets during the reported quarter.
Amkor remains optimistic about growth opportunities associated with high-performance computing, 5G communication, IoT wearables and automotive electronics, 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 62% of second-quarter revenues. Revenues improved 68.4% year over year to $729 million.
Mainstream Products — which includes lead frame packages, substrate-based wire bond packages and MEMS packages — accounted for the remaining 38% of second-quarter revenues. Revenues declined 3.9% year over year to $444 million.
The company operates in four end markets, namely Communications, Consumer, Automotive and Computing. These end markets contributed 38%, 27%, 19% and 16% to second-quarter net sales, respectively.
The Communications market remained strong in the quarter. The company witnessed growth in 4G products and a steady ramp of 5G products, including RF, front ends, modems and sensors. Computing grew 13%, both sequentially and year over year, driven by strength in all applications, including data center, infrastructure, and storage and PC laptops.
The Memory business increased more than 15% sequentially and 35% year over year. The NAND flash memory business remained strong in the quarter.
Per management, gross margin of 16.4% expanded 260 basis points (bps) from the year-ago quarter.
Operating expenses of $105.8 million increased 4.8% 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 7.4%, which expanded 490 bps from the prior-year quarter.
As of Jun 30, 2020, cash and short-term investments were $1.1 billion compared with $1 billion on Mar 31, 2020.
Further, total debt was $1.5 billion at second quarter-end, flat sequentially. Net debt was $451 million versus $514 in the prior quarter.
For third-quarter 2020, Amkor expects revenues in the range of $1.2-$1.3 billion, indicating 15% year-over-year growth and 6.3% sequential improvement. The Zacks Consensus Estimate for revenues is pegged at $1.16 billion. The increase is likely to be driven by the launch of flagship smart phones, including more 5G models.
Gross margin is expected in the range of 15-18%.
Further, earnings are expected within 17-35 cents per share. The Zacks Consensus Estimate for earnings is pegged at 18 cents per share.
Zacks Rank & Key Picks
Amkor currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader technology sector include Microchip Technology Incorporated MCHP, eBay EBAY and Advanced Micro Devices, Inc. AMD. While Microchip Technology and eBay sport a Zacks Rank #1 (Strong Buy), Advanced Micro carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth for Microchip Technology, eBay, and Advanced Micro is currently projected at 14.5%, 11.7% and 40.3%, respectively.
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