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Qorvo (QRVO) to Report Q4 Earnings: What's in the Cards?

Zacks Equity Research

Qorvo Inc. QRVO is set to release fourth-quarter fiscal 2017 earnings on May 3. Notably, the company has beaten the Zacks Consensus Estimate in the two of the trailing four quarters, with an average positive surprise of 7.18%.

In the last quarter, the company reported a positive earnings surprise of 15.09%. Earnings (excluding stock-based compensation) were $1.35 per share, which surged 31.1% from the year-ago quarter and was in line with the top end of the company’s guided range of $1.15–$1.35 per share.

Adjusted revenues improved 33.2% year over year to $825.4 million, which was slightly ahead of the Zacks Consensus Estimate of $823 million. Further, the figure was within management’s guided range of $800–$840 million.

Qorvo, Inc. Price and EPS Surprise

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

However, fourth-quarter guidance was disappointing. Qorvo’s revenues and earnings are forecasted to decline sequentially due to delayed flagship smartphone launches from two leading customers in China and a Tier 1 customer in Korea.

Nevertheless, we note that Qorvo has outperformed the Zacks Semiconductor Radio Frequency industry on a year-to-date basis. While the stock has returned 29.1%, the industry gained 28.5%.

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

Factors to Consider

Qorvo expects non-GAAP revenues in fourth-quarter fiscal 2017 to be approximately $610–$650 million. The company anticipates gross margin of approximately 46%, which is an improvement driven by positive seasonal mix effects as well as ongoing productivity and quality efforts.

Management expects operating expenses to increase less than 5% sequentially on development program timing and seasonal payroll effects. Earnings are projected to be in the range of 70–90 cents per share.

Qorvo’s ability to meet the growing requirements of customers through the introduction of innovative products is likely to augur well for the results. However, higher research & development costs can impact profitability in the near term.

Earnings Whispers

Our proven model does not conclusively show that Qorvo is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below.

Zacks ESP: Qorvo’s Earnings ESP is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 71 cents per share. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Qorvo carries a Zacks Rank #3, which when combined with a 0.00% ESP makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 and 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Stock to Consider

Here are some companies you may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:

DragonWave DRWI with an Earnings ESP of +8.82% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Impinj PI with an Earnings ESP of +50% and a Zacks Rank #2.

eGain Corp EGAN with an Earnings ESP of +50% and a Zacks Rank #2.

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