Skyworks Solutions (SWKS) Q3 Earnings: Is a Beat in Store?
Skyworks Solutions Inc. SWKS is set to release third-quarter fiscal 2018 results on Jul 19. The company beat the Zacks Consensus Estimate in the trailing four quarters, with an average positive surprise of 3.8%.
Last quarter, the company delivered non-GAAP earnings of $1.64 per share, outpacing the Zacks Consensus Estimate by 4 cents. The figure improved 13.1% from the year-ago quarter but declined 13.1% on a sequential basis.
Revenues of $913.4 million were up 7.2% year over year but down 13.2% sequentially. The reported figure missed the Zacks Consensus Estimate of $914 million.
Both earnings and revenues came ahead of management’s guidance. The better-than-expected performance was driven by worldwide demand for its wireless communications engines. The results reflected Skyworks’ growing clout in the connectivity solutions and 5G markets. Meanwhile, the company’s solutions continue to capture strategic design wins across the broad markets.
Guidance & Estimates
For third-quarter fiscal 2018, revenues are projected to be in the range of $875-$900 million. Non-GAAP earnings are expected to be $1.59 per share, up 1.3% year over year and down 3% sequentially.
The Zacks Consensus Estimate for the quarter is pegged at $1.59 per share, reflecting a year-over-year increase of 1.3%. However, Zacks Consensus Estimate for revenues is pegged at $887.7 million, down roughly 1.5% from the year-ago quarter.
Skyworks' shares have returned 4.9% on a year-to-date basis, underperforming the industry's rally of 5.6%.
Let's see how things are shaping up for this announcement.
Factors to Impact Q3 Results
The emergence of connected homes, autonomous vehicles, artificial intelligence (AI), augmented reality, wearables and network infrastructure presents significant growth opportunity for Skyworks’ connectivity solutions.
Recently, Skyworks powered connected home and virtual assistant systems at Bosch, Amazon, GE, AT&T/DIRECTV, Netgear, Sonos and Google.
Across broad markets, the company ramped Wi-Fi, fully-integrated Zigbee and Thread devices for Nest’s portfolio of video doorbells.
In the wearables segment, Skyworks supported Forerunner fitness smartwatches for Garmin. The company also enabled Honeywell’s LTE handheld enterprise hubs. The company witnessed additional design wins for its high-speed mesh networks at Belkin.
The company partnered major European network infrastructure suppliers to support small cell deployments including Verizon, AT&T, Vodafone and T-Mobile.
The company also launched a new suit of network-driven solution that supports wireless 5G networks, called Sky5. Notably, Sky5 solution is a platform that deals with revolutionary 5G applications. Across high-performance computing markets, Skyworks has commenced volume production of SkyOne Ultra.
The company witnessed dominant mobile customers leveraging its precision antenna tuners, DRx modules, SkyOne and SkyBlue which aided the top line.
All these factors bode well for the company and are likely to act as tailwinds in the to-be reported quarter.
However, the near-term softness witnessed across leading smart-phone customers remains a headwind. Overdependence on Apple AAPL for revenue generation continues to add to the woes. The company generates around 40% of its revenues by selling radio frequency chips, which are used in iPhone devices. Sequential decline reported in iPhone unit sales is likely to impact performance, going forward.
However, management remains optimistic on Skyworks’ expanding product portfolio and new customer wins to keep revenues churning and help its gross margins improve.
What the Zacks Model Unveils?
Our proven model conclusively shows that Skyworks is likely to beat earnings estimates this quarter. Per our model, a stock with a positive Earnings ESPand a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold), has higher chance of beating estimates. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Skyworks currently has a Zacks Rank #3 and an ESP of +1.63%.
Some Other Stocks With Favorable Combination
Here are a couple of other companies which, as per our model, have the right combination of elements to post an earnings beat this quarter:
Mellanox Technologies, Ltd. MLNX has an Earnings ESP of +4.44% and a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Textron Inc. TXT has an Earnings ESP of +0.41% and a Zacks Rank of 3.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Click for details >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Skyworks Solutions, Inc. (SWKS) : Free Stock Analysis Report
Apple Inc. (AAPL) : Free Stock Analysis Report
Textron Inc. (TXT) : Free Stock Analysis Report
Mellanox Technologies, Ltd. (MLNX) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
