Why is Skyworks (SWKS) down 0.3% since its last earnings report?

A month has passed since Skyworks Solutions’ (SWKS) last earnings report. Shares lost about 0.3% in that time, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Skyworks due for a breakout? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at the company’s most recent earnings report in order to better understand the important catalysts.

Skyworks’ second quarter earnings exceeded estimates, revenues fell y/y

Skyworks Solutions reported non-GAAP earnings of $1.55 per share for the second quarter of fiscal 2024, missing the Zacks Consensus Estimate by 1.97% and declining 23.3% year-over-year.

Revenues of $1.04 billion fell 9.3% year-over-year and beat the consensus estimate by 0.01%.

Mobile revenue accounted for almost 66% of total revenue and was down 19%.

During the second quarter of fiscal 2024, SWKS delivered integrated platforms to leading 5G smartphone OEMs, including flagship and mid-range versions for Samsung, Google and Oppo.

Skyworks has launched new initiatives in the automotive industry, including infotainment systems, traction inverters, cloud-based driver assistance and CV2X on-board units.

Skyworks also highlighted its solid portfolio of winning Wi-Fi 6E and Wi-Fi 7 projects in the edge IoT segment.

Broad markets accounted for almost 34% of total revenue, up 1%.

Operational details

Non-GAAP gross margin declined 500 basis points (bps) year-over-year to 45%.

R&D expenses as a percentage of revenue increased 190 basis points year-over-year to 14.8%.

Selling and administrative expenses increased by 50 basis points to 7.3% in the reported quarter.

Non-GAAP operating margin decreased 680 basis points year-over-year to 26.7% in the reported quarter.

Balance sheet and cash flow

As of March 29, 2024, cash and cash equivalents and marketable securities were $1.2 billion compared to $1.04 billion as of December 29, 2023.

Long-term debt remained constant at $993.6 million as of March 29, 2024 compared to $993.2 million as of December 29, 2023.

Cash generated from operations was $300 million in the quarter compared to $775 million in the prior quarter.

Free cash flow was $273 million, with a free cash flow margin of 26%.

Skyworks paid dividends worth $109 million during the reported quarter.

Conductivity

The company currently expects third-quarter fiscal 2024 revenue of $900 million, plus or minus 2%. Earnings of $1.21 per share are expected at the midpoint of these earnings guidance.

Gross margin is expected to be between 45% and 47%. Operating costs are expected to be between $192 million and $198 million.

How have estimates changed since then?

Last month, investors saw a downward trend in new estimates.

Due to these changes, the consensus estimate moved -15.58%.

VGM results

Currently, Skyworks has a weak Growth Score of D, but its Momentum Score is performing slightly better at C. Plotting a somewhat similar path, the stock is rated a B on the value side, ranking in the top 40% for this investment strategy.

Overall, the stock has a Total VGM Score of C. If you’re not focused on one strategy, this score should interest you.

Perspectives

Estimates for this company are generally on a downward trend, and the magnitude of these revisions indicates a downward shift. No wonder Skyworks has a Zacks Rank #4 (Sell). We expect a below-average rate of return on stocks in the coming months.

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