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Cirrus Logic (CRUS) Down 20.1% Since Last Earnings Report: Can It Rebound?

Zacks Equity Research
·3 mins read

A month has gone by since the last earnings report for Cirrus Logic (CRUS). Shares have lost about 20.1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Cirrus Logic 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 catalysts.

Cirrus Logic Q3 Earnings Surpass Estimates

Cirrus Logic delivered third-quarter fiscal 2020 non-GAAP earnings per share of $1.41, which topped the Zacks Consensus Estimate of $1.12 as well as the year-ago figure of 91 cents.

Total revenues of $374.7 million also surpassed the Zacks Consensus Estimate of $346 million and improved 16% year over year as well. Higher-than-expected volumes of boosted amplifiers, haptic drivers and smart codecs shipping in smartphones drove revenues.

However, on a sequential basis, revenues declined 4% due to reduction in sales to certain Android customers, ahead of product launches in the first half 2020.

Quarterly Details

Segment wise, portable audio product revenues (92% of total revenues) came in at $344.87 million, up 19.5% year over year. However, non-portable audio and other products (8%) decreased 16.4% to $29.8 million.

Cirrus Logic’s largest customer, apparently Apple, accounted for 83% of its sales for the reported quarter.

Non-GAAP gross profit of $197.8 million increased 21% on a year-over-year basis. Non-GAAP gross margin expanded 240 basis points (bps) to 52.8%, driven by a favorable product mix. Supply chain efficiencies and cost reductions on certain products were also an upside

Cirrus Logic’s non-GAAP operating expenses inched up 2.8% to $103.2 million. Non-GAAP operating income of $94.6 million too surged 50.1%. Moreover, non-GAAP operating margin expanded 590 bps from the year-ago quarter to 25.3%.

Balance Sheet and Cash Flow

The company exited the fiscal third quarter with cash and cash equivalents of $342.3 million compared with $221.9 million at the end of the earlier reported quarter.

Accounts receivables were $175.9 million compared with $207.96 million in the last reported quarter. Notably, the company did not have any long-term debt during the quarter under review.

Cash flow from operations was $128.7 million in the quarter. As of Dec 28, 2019, the company has $170 million remaining under its share repurchase authorization.

Outlook

The company expects fourth-quarter fiscal 2020 revenues between $250 million and $290 million, indicating a decline of 28% sequentially but an improvement of 13% year over year at the midpoint.

The guidance provided suggests strong demand for certain components shipping in smartphones, offset by normal seasonal trends.

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 132.5% due to these changes.

VGM Scores

At this time, Cirrus Logic has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. However, 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.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. It comes with little surprise Cirrus Logic 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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