Why Is Skyworks (SWKS) Up 18.2% Since Last Earnings Report?

A month has gone by since the last earnings report for Skyworks Solutions (SWKS). Shares have added about 18.2% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Skyworks 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 drivers.

Skyworks' Q2 Earnings Match Estimates

Skyworks Solutions, Inc. reported second-quarter fiscal 2020 non-GAAP earnings of $1.34 per share, which is in line with the Zacks Consensus Estimate. However, the figure declined 8.8% from the year-ago quarter’s reported figure.

Revenues of $766.1 million marginally surpassed the Zacks Consensus Estimate of $765.7 million. However, the top line declined 5.5% from the year-ago quarter’s level.

Per management, sluggish performance stemming from COVID-19 related global supply chain disruptions have had a negative impact on demand.

Mobile contributed 70% to revenues, while the balance came from broad markets.

Operating Details

Non-GAAP gross margin contracted 50 basis points (bps) on a year-over-year basis to 50.2%.

Research & development expenses, as percentage of revenues, expanded 150 bps on a year-over-year basis to 14.8%. Moreover, selling, general & administrative expenses, as percentage of revenues, expanded 170 bps from the year-ago quarter’s tally to 7.6%.

Non-GAAP operating margin contracted 160 bps on a year-over-year basis to 32.5% in the reported quarter.

Balance Sheet & Cash Flow

As of Mar 27, 2020, cash & cash equivalents were $1.108 billion, down from $1.23 billion as of Dec 27, 2019.

Cash generated by operating activities was $280.4 million compared with $398.4 million in the prior quarter.

The company reported free cash flow of $220 million and free cash flow margin of 29% compared with $287 million and 32% in the previous quarter, respectively.

Capital expenditure came in at $60 million in the reported quarter compared with $111.2 million in the prior quarter.

Skyworks repurchased 3.2 million shares for a total of $284 million and paid out $75 million as dividends.

Guidance

Uncertainty pertaining to the coronavirus pandemic compelled the company to widen guidance range compared with previous quarters. For third-quarter fiscal 2020, revenues are expected in the range of $670-$710 million.

Non-GAAP earnings are anticipated to be $1.13 per share.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision flatlined during the past month. The consensus estimate has shifted -15.69% due to these changes.

VGM Scores

Currently, Skyworks has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Skyworks has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.

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