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Skyworks (SWKS) to Report Q2 Earnings: What's in the Cards?

Zacks Equity Research

Skyworks Solutions, Inc. SWKS is set to report second-quarter 2019 results on May 2. Notably, the company surpassed the Zacks Consensus Estimate for earnings in three of the trailing four quarters, with an average positive earnings surprise of 1.67%

Past-Quarter Performance

Skyworks had reported first-quarter fiscal 2019 non-GAAP earnings of $1.83 per share, missing the Zacks Consensus Estimate by a penny. The figure decreased 8.5% from the year-ago quarter.

Revenues of $972 million were down 7.6 % year over year, primarily owing to decline across mobile business. Further, the top line missed the Zacks Consensus Estimate of $975 million.

What to Expect in Q2

For second-quarter fiscal 2019, revenues are expected to be in the range of $800 million to $820 million. Non-GAAP earnings are anticipated to be $1.43 per share at mid-point.

The Zacks Consensus Estimate for second-quarter earnings is pegged at $1.43 per share, unchanged for the last 30 days. The Zacks Consensus Estimate for revenues stands at $810.6 million, suggesting a decrease of 11.3% from the year-ago reported figure.

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

Factors at Play

Skyworks’ first-quarter results are likely to benefit from strong demand of its wireless communications engines. The company’s expanding product portfolio, growing clout in the IoT solutions and 5G markets will positively impact the to-be-reported quarter‘s results.

Skyworks launch of SkyOne Ultra 3.0 suite in the quarter under review will strengthen its presence in the automotive market. Further, the emergence of connected homes, 5G, AI, augmented reality (AR), ADAS, wearables and network infrastructure are expected to positively impact the to-be-quarter results.

The company also deployed 5G base station solutions for leading European infrastructure providers which is another positive.

Skyworks Solutions, Inc. Price and EPS Surprise


Skyworks Solutions, Inc. Price and EPS Surprise | Skyworks Solutions, Inc. Quote

Further, the company’s Avnera Corporation acquisition is noteworthy. The buyout gives Skyworks access to robust analog/mixed signal voice, audio and speech processing engines. These synergies are likely to benefit the second-quarter results.

However, near-term softness witnessed across leading smart-phone customers remains a headwind. Moreover, unit decline across mobile business is likely to negatively impact the to-be-reported quarter’s results.

Further, the company faces stiff competition from the likes of Broadcom AVGO and Qorvo, which exposes it to significant pricing pressures. This is likely to hamper the second-quarter results.

Overdependence on Apple for revenue generation remains a woe.

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.

Skyworks has a Zacks Rank #3 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 to Consider

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

Square, Inc. SQ has an Earnings ESP of +5.50% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Ameren Corp. AEE has an Earnings ESP of +3.70% and a Zacks Rank #3.

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