What's in Store for Skyworks (SWKS) This Earnings Season?

Zacks Equity Research
·4-min read

Skyworks Solutions, Inc. SWKS is set to release fourth-quarter fiscal 2020 results on Nov 2.

For fiscal fourth quarter, Skyworks expects revenues in the range of $830-$850 million, while non-GAAP adjusted earnings is anticipated to be $1.51 per share.

The Zacks Consensus Estimate for fiscal fourth-quarter revenues is pegged at $842.5 million, which indicates an increase of 1.8% from the year-ago quarter’s reported figure.

The consensus mark for earnings has been steady in the past seven days at $1.52 per share, which suggests no changes from prior-year quarter’s reported figure.

Skyworks Solutions, Inc. Price and EPS Surprise

Skyworks Solutions, Inc. Price and EPS Surprise
Skyworks Solutions, Inc. Price and EPS Surprise

Skyworks Solutions, Inc. price-eps-surprise | Skyworks Solutions, Inc. Quote

Notably, the company’s earnings have surpassed the Zacks Consensus Estimate in each of the last four quarters. It has a trailing four-quarter earnings surprise of 3.44%, on average.

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

Factors Likely to Have Influenced Q4

Continued momentum seen in Skyworks’ 5G and Wi-Fi 6 solutions is likely to have cushioned revenue growth in the to-be-reported quarter. Demand continues to be high owing to increased need for high-speed connectivity amid the COVID-19 induced surge in the remote work, video streaming and web-based learning trends.

In fiscal third-quarter conference call, management noted 5G subscriptions, globally, are continuing to grow with estimates set to hit $3 billion over the next five years. This, in turn, is expected to boost the top line in the to-be-reported quarter.

Increasing demand for 5G handsets, especially in China, is anticipated to have driven the company’s performance in the quarter to be reported. Moreover, in the third quarter conference call, management noted that newly released 3GPP standards have validated the extension of 5G technology into Internet of Things (IoT), Vehicle-to-everything (V2X) as well as other services. This is likely to have stoked demand for Skyworks’ 5G solutions.

Momentum in deal wins from various customers across industrial IoT, automotive, aerospace and defense verticals is anticipated to have continued in the fiscal fourth quarter.

In fact, Skyworks, which carries a Zacks Rank #3 (Hold), is helping set up 5G hotspots in collaboration with Verizon and AT&T T. Meanwhile, AT&T also selected the company’s Wi-Fi 6 solutions to power its tri-band home gateways.

You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Increasing popularity of the company's products instill confidence in the stock. Notably, shares of the company have returned 20.1% in the year-to-date period against the industry’s increase of 7.8%.

Moving ahead, the significant traction witnessed for Sky5 platform that is powering smartphone launches at China-based OEMs like Oppo, Xiaomi and Vivo as well as Korea-based player Samsung, is expected to have contributed to fiscal fourth-quarter revenues. Markedly, the Sky5 platform was adopted by leading automobile manufacturers like Ford and BMW in fiscal third quarter.

Further, projected momentum in new iPhone sales might have positively impacted revenue numbers in the quarter under review. Notably, Skyworks supplies radio frequency chips to Apple and derives a significant portion of its revenues from the company.

Growing momentum for Skyworks’ bulk acoustic wave (BAW) filters, especially in mobile and broad markets, is likely to have driven top-line growth in the fiscal fourth quarter. The company has been witnessing significant design wins for BAW-enabled devices. During the third quarter earnings call, management noted that total shipments of BAW-enabled devices have crossed 150 million units.

Nonetheless, declining trend in smartphone shipments is expected to have been a headwind. Per Gartner data, the global smartphone sales witnessed a decline of 20.4% in the second quarter of calendar 2020 and the downside is likely to have continued due to the impact of the pandemic.

Also, increasing expenses on product enhancements amid stiff competition from Qorvo QRVO and Broadcom AVGO in the radio frequency semiconductor market is anticipated to have limited margin expansion in the fiscal fourth quarter.

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