Earnings Estimates Moving Higher for Vanda (VNDA): Time to Buy?
It has been about a month since the last earnings report for Amkor Technology, Inc. AMKR. Shares have added about 11.2% in that time frame.
Will the recent positive trend continue leading up to its next earnings release, or is AMKR due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Amkor Technology Beats on Q4 Earnings & Revenues
Amkor Technology reported fourth-quarter 2017 adjusted earnings of 24 cents per share, surpassing the Zacks Consensus Estimate by 5 cents.
Also, revenues of $1.15 billion surpassed the Zacks Consensus Estimate of $1.09 billion.
Amkor completed the acquisition of Europe's largest OSATS (Outsourced Semiconductor Assembly and Test Services) company, Nanium S.A. in May 2017. Management stated that the integration of NANIUM is now complete and the deal expands Amkor’s presence in fan-out technology. The company has transferred NANIUM process to its K5 facility and has expanded capacity in the Porto facility.
Also, the company has been making efforts to channelize its resources in important growth areas like automotive and increased investments in Greater China. In this regard, Amkor invested huge amounts in the Shanghai factory and Greater China sales team to attract more business.
Moreover, the company remains optimistic about growth in its automotive business. Per Market forecasts, automotive market will grow in high single digit in the coming years. The growth is expected to be driven by increasing electronic content. Given its attractive value proposition for automotive customers, the company is poised to benefit from it.
Revenues of $1.15 billion increased 1.2% sequentially and 12.4% year over year. The increase was driven by strength in nearly all its end markets, particularly mobile communications, and solid execution.
Also, revenues came in above the Zacks Consensus Estimate of $1.09 billion and company’s guidance of $1.05-$1.13 billion.
Revenues by Product Lines
The revenue mix in terms of product lines is discussed below.
Advanced Products include flip chip scale packages, wafer-level chip scale packages and flip chip ball grid array packages. It accounted for approximately 51% of fourth-quarter revenues. Revenues increased 4.9% sequentially and 28.8% year over year.
In the quarter, shipments in the mobile communications market remained strong, driven by demand for wafer level, MEMS and advanced System-in-Package technologies.
Mainstream products include lead frame packages, substrate-based wire bond packages and MEMS packages. It accounted for the remaining 49% of fourth-quarter revenues. Revenues decreased 2.4% sequentially and 0.7% year over year.
Per the press release, gross margin was 19.6%, up 50 basis points (bps) sequentially but down 260 bps from the year-ago quarter.
The sequential increase was due to higher revenues. Also the completion of factory consolidation in Japan aided the gross margins in the quarter.
Operating expenses of $118.4 million increased 14.8% year over year. As a percentage of sales, both selling, general and administrative expenses, and research and development expenses increased.
As a result, operating margin was 9.6%, down 280 bps from the prior-year quarter.
Balance Sheet & Cash Flow
During the reported quarter, cash flow from operations was $204 million compared with $214 million in the prior quarter. Capex was $137 million compared with $142 million, whereas free cash flow was $76 million compared with $74 million in the prior quarter.
Total cash, cash equivalents and restricted cash were $598.4 million in the fourth quarter, up from $521.4 million in the prior quarter.
For the first quarter, Amkor expects revenues in the range of $0.98-$1.06 billion, up 12% year over year. Gross margin is expected within 14-16%. Earnings per share are expected in the range of (2 cents)-11 cents on a GAAP basis.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. There has been one revision lower for the current quarter.
Amkor Technology, Inc. Price and Consensus
Amkor Technology, Inc. Price and Consensus | Amkor Technology, Inc. Quote
At this time, AMKR has an average Growth Score of C, though it is lagging a bit on the momentum front with a D. The stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for value investors than growth investors.
Estimates have been broadly trending downward for the stock and the magnitude of this revision indicates a downward shift. It's no surprise that AMKR has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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