Why Is Qorvo (QRVO) Up 1.5% Since Last Earnings Report?
It has been about a month since the last earnings report for Qorvo (QRVO). Shares have added about 1.5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Qorvo due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Qorvo Q1 Earnings Beat Estimates, Revenues Fall Y/Y
Qorvo reported healthy first-quarter fiscal 2024 results, with the bottom and the top line beating the respective Zacks Consensus Estimate.
Demand softness in various end markets, owing to macroeconomic challenges and inventory adjustments, resulted in lower revenues year over year. However, positive demand trends for IoT connectivity solutions and design wins in defense, automotive and radar applications cushioned the top line.
Net Income
On a GAAP basis, the company reported a net loss of $43.6 million or a loss of 44 cents per share against a net income of $68.9 million or 65 cents per share in the prior-year quarter. The loss was primarily attributable to lower net sales year over year.
Non-GAAP net income in the quarter was $33.6 million or 34 cents per share, down from $238.4 million or $2.25 per share in the prior-year quarter. The bottom line surpassed the Zacks Consensus Estimates by 19 cents.
Revenues
Quarterly revenues declined to $651.2 million from $1,035.4 million in the year-earlier quarter. Despite tailwinds in defense, aerospace and automotive, weak demand in 5G infrastructure, customer inventory adjustments and underutilization of production capacity impeded revenue growth in the quarter. However, the top line beat the Zacks Consensus Estimate of $640 million.
Net sales in High-Performance Analog (HPA) were supported by multiple design wins across diverse market segments, including defense programs extending multiple years. The company secured a multi-million-dollar order for silicon carbide power devices supporting AI servers and other data center applications. Strength in automotive and radar systems enhanced the top line from this vertical. Non-GAAP operating margin in the HPA segment was 17% during the quarter.
Connectivity and Sensors Group (CSG) witnessed solid demand trends of highly-integrated IoT connectivity solutions, Wi-Fi 7 RF front ends and force-sensing touch sensors. The company secured multiple deals for Wi-Fi 7 BAW filters. It achieved Matter 1.1 certification, which significantly boosted Qorvo’s market opportunity among top smart home ecosystem customers. For the CSG segment, the non-GAAP operating margin was negative 20%.
Net sales in Advance Cellular were supported by healthy traction from leading smartphone manufacturers. Non-GAAP operating margin for the segment was 11%.
Other Details
On a GAAP basis, gross profit declined to $229.1 million from $375.3 million in the year-ago quarter. Non-GAAP gross margin was 42.9%, down from 50% reported in the prior-year quarter. Non-GAAP operating income totaled $46.7 million, witnessing a sharp decline from $284.4 million in the year-ago quarter on lower revenues.
Cash Flow & Liquidity
As of Jul 1, 2023, QRVO had $744.4 million in cash and cash equivalents with $2,048.3 million of long-term debt. The company generated $44.9 million in net cash from operating activities, with a free cash flow of $5.4 million. During the quarter, Qorvo repurchased $100 million worth of shares at an average price of $96.81.
Outlook
For second-quarter fiscal 2024, the company estimates revenues to be around $1 billion (+/- $15 million). Non-GAAP gross margin is expected in the range of 45-46%. Non-GAAP earnings per share are likely to be $1.75 at the midpoint of revenue guidance. The company expects non-GAAP operating expenses to be around $240 million in the September quarter. Management expects that channel inventory digestion will continue in the fiscal second quarter and will be normalized by the end of 2023.
For fiscal 2024, the company reiterated its earlier guidance. It expects revenues to be higher than fiscal 2023 levels, with non-GAAP gross margin of 44%.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
VGM Scores
Currently, Qorvo has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Qorvo has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Qorvo, Inc. (QRVO) : Free Stock Analysis Report
