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Qorvo (QRVO) to Report Q3 Earnings: What's in the Cards?

Zacks Equity Research

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

Notably, the company has surpassed the Zacks Consensus Estimate in the trailing four quarters, recording average beat of 10.5%.

Qorvo delivered second-quarter non-GAAP earnings of $1.75 per share, surpassing the Zacks Consensus Estimate of $1.62 per share. The figure jumped 15.1% from the year-ago quarter.

Revenues on a non-GAAP basis increased 7.6% year over year to $884.4 million. The figure was above management’s guidance of $850-$860 million. The Zacks Consensus Estimate is pegged at $856 million.

The results can be attributed to robust mobile growth, improved progress in IDP and stringent cost control measures. The company benefited from increased demand in the performance-tier for RF Fusion based solutions, antenna tuning, discrete components and BAW-based multiplexers.

Qorvo, Inc. Price and EPS Surprise

 

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

Guidance & Estimate

The company recently provided an update on third-quarter fiscal 2019 outlook.

The company now anticipates third-quarter revenues for 2018 to be in the band of $800 million to $840 million (midpoint of $820 million), down from its prior range of $880-$900 million (mid-point of $890 million) citing reduced demand for flagship smartphones. It reflects a decline of 7.9% considering mid-point level.

The corresponding Zacks Consensus Estimate is pegged at $820.9 million, down 2.9% year over year.

Non-GAAP earnings per share have been forecast to be $1.70 per share, down from the previous guidance of $1.95 per share. The Zacks Consensus Estimate is also pegged at $1.70 per share, reflecting a marginal rise of 0.6% year over year.

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

Factors Likely to Influence Q3 Results

Expanding Product Portfolio: A Key Catalyst

We believe Qorvo is well poised to gain from solid demand of its performance-tier for RF Fusion based solutions. It will also benefit from antenna tuning, discrete components and Bulk Acoustic Wave (“BAW”) based multiplexers.

Mobile Products (“MP”) revenues were $667 million in the last reported quarter, surging 37% sequentially driven by improving demand of flagship smartphone product. The Zacks Consensus Estimate for MP revenues is projected to be $654 million, up 1.7% year over year.

Qorvo’s plans to exhibit its innovative RF products at the CES 2019 in Las Vegas bode well. The latest solutions support Bluetooth and BLE, Wi-Fi, Zigbee, LTE and Cellular/NB-IoT which are not only compact in size but will also aid in extending the battery life of portable products.

The company’s cellular RF and WiFi solutions find significant adoption in a variety of mobile devices, including smartphones, notebook computers, wearables, tablets, and cellular-based applications.

Moreover, robust adoption of the company’s solutions in defense (advanced radars and other electronic warfare products) and connectivity (Wi-Fi and emerging IoT applications) is noteworthy. This is anticipated to bolster Infrastructure and Defense (“IDP”) segment revenues.  The Zacks Consensus Estimate for IDP revenues is projected to be $219 million, indicating growth of 7.9% from the year-ago quarter.

The company recently enhanced its 5G infrastructure solutions portfolio which now comprises industry’s first 28 GHz Gallium Nitride (GaN) integrated front end modules (FEMs) — QPF4001.

Accelerating timeline for 5G deployment bodes well for Qorvo. The company has participated in dozens of 5G field trials and demonstrations. We believe an expanding portfolio enabling 5G deployment augurs well for the company.

Qorvo’s partnership with LEEDARSON is also worth mentioning in this regard. The collaboration is aimed at delivering IoT standard solutions by offering a range of smart home lighting solutions combining Zigbee 3.0 with Bluetooth Low Energy (“BLE”) 5.0 protocols.

The company had unveiled QPG6095 system-on-chip (SoC) controller integrated with new LEEDARSON smart light bulb and light switch solution to enhance smart home communications systems for ultra-low-power wireless applications.

Further, Qorvo was selected by Samsung to supply 3.5 GHz 5G FEM, supporting multiple 5G mobile device samples. The company also started shipping RF Fusion Phase 6 for Vivo's NEX flagship smartphone.

Robust growth in company’s wireless connectivity and growth in base station solutions. Rapid adoption of GaN for high-power applications, radars and other electronic warfare products are anticipated to drive top-line.

However, customer concentration, particularly from Apple AAPL and 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. The 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 Combinatio

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.

Lumentum Holdings Inc. LITE has an Earnings ESP of +2.37% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Vertex Pharmaceuticals Incorporated VRTX has an Earnings ESP of +4.52% and a Zacks Rank #3.

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