Factors Setting the Tone for Qorvo's (QRVO) Q4 Earnings

Qorvo QRVO is scheduled to report fourth-quarter fiscal 2020 results on May 7.

The company provided updated guidance for revenues on Mar 3, considering the impact of coronavirus. The company now expects fourth-quarter fiscal 2020 revenues to be approximately $770 million, down from the prior range of $800-$840 million (mid-point of $820 million).

The consensus mark for revenues is pegged at $768.4 million, which implies growth of 12.9% from the year-ago quarter’s reported figure.

Per the previous guidance provided in the last earnings call, Qorvo had projected earnings to be $1.55 per share at mid-point for the fiscal fourth quarter. The Zacks Consensus Estimate for fiscal fourth-quarter earnings is pegged at $1.32 per share, unchanged in the past 30 days. The figure indicates growth of 8.2% from the year-ago quarter’s reported figure.

Notably, the company’s earnings surpassed the Zacks Consensus Estimate in the last four quarters. It has a trailing four-quarter positive earnings surprise of 15.4%, on average.

Let’s see how things have shaped up prior to this announcement.

Qorvo, Inc. Price and EPS Surprise

 

Qorvo, Inc. Price and EPS Surprise

Qorvo, Inc. price-eps-surprise | Qorvo, Inc. Quote

 

Factors to Consider

Qorvo’s fiscal fourth-quarter results are expected to have benefited from consistent solid demand for ultra-high band front end modules (FEM) due to the launch of next-gen 5G smartphones.

Moreover, the company’s Bulk Acoustic Wave (BAW) based multiplexers that enable advanced carrier aggregation are likely to have witnessed robust traction due to their importance for next-gen higher data rate applications.

However, Qorvo has stated that the global coronavirus pandemic has reduced customer demand and impacted smartphone supply chains. This is likely to have impacted the company’s fiscal fourth-quarter revenues.

Qorvo expects Mobile Products (MP) division sales to increase sequentially and return to growth on a year-over-year basis, driven by an increase in 5G handset volumes. Notably, the Zacks Consensus Estimate for fourth-quarter Mobile Products revenues is pegged at $551 million that indicates year-over-year growth of 24.4%.

Further, growing momentum for the company’s solutions in defense (advanced radars and other electronic warfare products) and connectivity (Wi-Fi 6) is a positive. Notably, increase in work-from-home trends due to the COVID-19 pandemic is expected to have driven demand for Wi-Fi 6, which is likely to have contributed to fiscal fourth-quarter performance.

Rapid adoption of Gallium nitride (GaN) technology for high-power applications and Massive MIMO deployments is expected to have aided the IDP segment’s revenue growth.

In the connected car domain, the company introduced a complete V2X front-end solution, featuring 5.9 gigahertz Wi-Fi coexistence BAW filters, which are gaining traction among automotive OEMs and Tier 1 suppliers. This in turn is likely to have driven the top line in the fiscal fourth quarter.

The Zacks Consensus Estimate for fourth-quarter Infrastructure & Defense Products revenues is pegged at $236 million, which indicates a decline of 0.8% year over year.

However, growing expenses on product development amid stiff competition from Skyworks and Broadcom in the radio frequency semiconductor market as well as COVID-19 induced macroeconomic crisis are likely to have affected profitability in the fiscal fourth quarter.

Developments in Q4

Qorvo completed its acquisition of Custom MMIC to expand mmWave capabilities as well as bolster its GaN and gallium arsenide (GaAs) portfolio for the defense and aerospace markets.

The company also acquired Decawave to strengthen its MP segment with ultra-wideband (UWB) technology capabilities and bolster demand across mobile, automotive and IoT end markets.

Although the aforementioned acquisitions favor business prospects in the longer haul, incremental costs related to these buyouts are likely to have exerted pressure on margins in the quarter under review.

What Our Model Says

According to the Zacks Model, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here.

Qorvo has an Earnings ESP of 0.00% and a Zacks Rank #4 (Sell). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks to Consider

Here are some stocks you may consider as our proven model shows that these have the right mix of elements to beat estimates this time around.

Wayfair W has an Earnings ESP of +1.69% and a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Shopify SHOP has an Earnings ESP of +23.41% and is #2 Ranked.

Etsy ETSY has an Earnings ESP of +18.31% and a Zacks Rank #2.

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