Qorvo (QRVO) Up 4.7% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Qorvo (QRVO). Shares have added about 4.7% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Qorvo 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 catalysts.
Qorvo Q4 Earnings Beat Estimates, Top-Line Decline Y/Y
Qorvo reported healthy fourth-quarter fiscal 2023 results, with the bottom and the top line surpassing the respective Zacks Consensus Estimate. Despite inventory-reduction efforts and several design wins, sluggish demand trends in the end markets and the underutilization of production capacity led to a top-line decline year over year.
Net Income
GAAP net loss in the reported quarter was $138.4 million or a loss of $1.39 per share against a net income of $212.3 million or $1.95 per share in the prior-year quarter. The steep decline was caused by lower net sales during the quarter.
Non-GAAP earnings in the reported quarter were $25.7 million or 26 cents per share compared with $339.6 million or $3.12 per share in the year-earlier quarter. The bottom line beat the Zacks Consensus Estimates by 14 cents.
For fiscal 2023, Qorvo recorded a GAAP net income of $103.1 million or an income of $1 per share compared with $1,033.3 million or $9.26 per share in fiscal 2022.
Revenues
Quarterly revenues declined to $632.7 million from $1,166.2 million owing to soft demand trends. However, the revenues exceeded the midpoint of the guidance. In spite of efforts to reduce channel inventory levels, end market weakness and underutilization of production capacity affected margins. The top line beat the Zacks Consensus Estimate of $621 million.
In fiscal 2023, revenues aggregated $3,569.4 million compared with $4,645.7 million reported in fiscal 2022.
Net sales in High-Performance Analog (HPA) were supported by modest growth in power devices and defense markets. In the HPA segment, the company secured significant design wins for various technologies, including multiple RF components and BAW-based multiplexers. The Power devices business gained from silicon carbide inverter orders for residential and industrial solar applications. Multiple design wins in aerospace, battery management, defense radar, electric vehicles and renewable energy systems boosted the sales growth from this segment.
Revenues from Connectivity and Sensors Group were dented by inventory digestion and low demand for Wi-Fi enabled products and cellular IoT. However, strength in automotive connectivity, indoor navigation, smart home, sensor business, automotive smart interiors and enhanced human machine interfaces partially reversed this declining trend.
In Advance Cellular, Qorvo's sequential expansion in Android revenue was driven by multiple design wins with several major smartphone players.
Other Details
On a GAAP basis, gross profit declined to $114.7 million from $570.3 million in the year-ago quarter. Non-GAAP gross margin declined to 41.3% from 52% reported in the year-ago quarter. Non-GAAP operating margin was $33.8 million compared with $377.2 million in prior-year quarter. The decline was propelled by high restructuring related charges and stock-based compensation.
Cash Flow & Liquidity
As of Mar 31, 2023, QRVO had $808.8 million in cash and cash equivalents with $2,048.1 million of long-term debt compared with respective tallies of $972.6 million and $2,047.1 million in the year-ago period. Free cash flow at the end of the March quarter was $31.3 million, with a capital expenditure of $34 million.
Outlook
For first-quarter fiscal 2024, management expects revenues in the range of $620-660 million. Despite weakness in end markets, management expects easing of channel inventory and multiple design wins will support the top line. Non-GAAP gross margin is estimated at 41.5% and non-GAAP earnings per share are likely to be in the vicinity of 15 cents. The company expects non-GAAP operating expense to be in the range of $10-12 million in the June quarter.
For fiscal 2024, management expects revenues to be higher than fiscal 2023 levels with a non-GAAP gross margin of 44%.
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 29.17% due to these changes.
VGM Scores
Currently, Qorvo has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Qorvo has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Qorvo, Inc. (QRVO) : Free Stock Analysis Report
