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Factors Expected to Influence Qorvo (QRVO) in Q4 Earnings

Zacks Equity Research

Qorvo, Inc. QRVO  is scheduled to report fourth-quarter fiscal 2019 results on May 7.

Notably, the company has surpassed the Zacks Consensus Estimate in the trailing four quarters, with an average beat of 11.3%.

Past-Quarter Performance

Qorvo had reported third-quarter fiscal 2019 non-GAAP earnings of $1.80 per share, surpassing the Zacks Consensus Estimate of $1.70 per share. The figure also jumped 9.5% from the year-ago quarter.

Revenues on a non-GAAP basis increased 1.5% year over year to $832.3 million. The Zacks Consensus Estimate is pegged at $821 million.

Guidance & Estimate

For the fourth quarter of fiscal 2019, Qorvo expects revenues between $660 million and $680 million. Earnings are projected to be $1.05 per share at the mid-point.

The corresponding Zacks Consensus Estimate for revenues is currently pegged at $671.2 million, suggesting an improvement of 0.9% from the year-ago reported figure.

The Zacks Consensus Estimate for earnings is currently pegged at $1.06 per share, indicating a marginal decline of 0.9% from the year-ago quarter.

Let’s see how things are shaping up prior to this announcement.

Qorvo, Inc. Price and EPS Surprise

 

Qorvo, Inc. Price and EPS Surprise | Qorvo, Inc. Quote

Factors Likely to Influence Q4 Results

We believe solid demand of Qorvo’s performance-tier for RF Fusion based solutions will aid the top line in to-be-reported quarter. Results are also likely to benefit from antenna tuning, discrete components and Bulk Acoustic Wave (BAW) based multiplexers.

Moreover, robust growth in company’s wireless connectivity, improvement in base station solutions and robust 5G infrastructure market demand is expected to positively impact the to-be-quarter’s results.

Further, strong demand for the company’s solutions in defense (advanced radars and other electronic warfare products) and connectivity (Wi-Fi and emerging IoT applications) is another positive. Rapid adoption of GaN for high-power applications, radars and other electronic warfare products are anticipated to drive the top line.

The company recently enhanced 5G infrastructure solutions portfolio with industry’s first 28 GHz Gallium Nitride (GaN) integrated front end modules (FEMs) — QPF4001. Further, Qorvo augmented shipments of 5G massive MIMO infrastructure solutions to various OEMs. The company’s expanding RF product portfolio pertaining to 5G and massive MIMO base stations bodes well in the to-be-reported quarter.

Qorvo recently inked a deal to acquire Active-Semi International, Inc. with an aim to strengthen its portfolio of programmable analog and mixed signal power offerings.

Management intends to divulge details about the latest development in its upcoming quarterly earnings release. Post the acquisition, financials of Active-Semi will be reported under Qorvo’s Infrastructure and Defense Products (IDP) operating segment.

In third-quarter fiscal 2019, MP revenues came in at $602 million, down 6% year over year. Further, the trend in Mobile Products revenues in the fourth quarter are likely to persist and is expected to be down roughly 25% sequentially, primarily owing to seasonal decline.

Meanwhile, IDP revenues grew double digit year over year to $230 million, marking the 11th consecutive quarter of growth.

In this scenario, we believe the latest deal can be considered as an effort to strengthen IDP segment in to–be-reported quarter in a bid to cushion the company’s business from the underperforming mobile domain. This is a smart move on the part of the company.

We also note that the buyout will aid to the company to enhance its competitive position against peers in power solutions market like Analog Devices, CREE, among others.

However, customer concentration, particularly from Apple AAPLand Huawei remains a significant headwind for Qorvo.

What the Zacks Model Unveils

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. Sell-rated stocks (Zacks Rank #4 or 5) are best avoided.

Qorvo has a Zacks Rank #4 (Sell) and an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks with Favorable Combination

Here are a few stocks that are worth considering as our model shows that these have the right combination of elements to deliver an earnings beat in the upcoming releases.

Ultragenyx Pharmaceutical Inc. RARE has an Earnings ESP of +6.36% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Sapiens International Corporation N.V. SPNS has an Earnings ESP of +6.67% and a Zacks Rank #3.

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