Yahoo Finance Skyworks Solutions (NASDAQ:SWKS) Reports Q2 In Line With Expectations, Next Quarter's Growth Looks Optimistic
Wireless chips maker Skyworks Solutions (NASDAQ: SWKS) reported results in line with analysts' expectations in Q2 CY2024, with revenue down 15.5% year on year to $905.5 million. The company expects next quarter's revenue to be around $1.02 billion, coming in 1.3% above analysts' estimates. It made a non-GAAP profit of $1.21 per share, down from its profit of $1.73 per share in the same quarter last year.
Is now the time to buy Skyworks Solutions? Find out in our full research report.
Skyworks Solutions (SWKS) Q2 CY2024 Highlights:
Revenue: $905.5 million vs analyst estimates of $900.6 million (small beat)
Adjusted Operating Income: $219 million vs analyst estimates of $218.8 million (small beat)
EPS (non-GAAP): $1.21 vs analyst expectations of $1.21 (in line)
Revenue Guidance for Q3 CY2024 is $1.02 billion at the midpoint, above analyst estimates of $1.01 billion
Gross Margin (GAAP): 40.2%, down from 43.3% in the same quarter last year
Inventory Days Outstanding: 138, up from 122 in the previous quarter
Free Cash Flow of $297.9 million, similar to the previous quarter
Market Capitalization: $18.84 billion
“Skyworks generated solid results and strong profitability consistent with our guidance,” said Liam K. Griffin, Chairman, Chief Executive Officer and President of Skyworks.
Result of a merger of Alpha Industries and the wireless communications division of Conexant, Skyworks Solutions (NASDAQ: SWKS) is a designer and manufacturer of chips used in smartphones, autos, and industrial applications to amplify, filter, and process wireless signals.
Analog Semiconductors
Demand for analog chips is generally linked to the overall level of economic growth, as analog chips serve as the building blocks of most electronic goods and equipment. Unlike digital chip designers, analog chip makers tend to produce the majority of their own chips, as analog chip production does not require expensive leading edge nodes. Less dependent on major secular growth drivers, analog product cycles are much longer, often 5-7 years.
Sales Growth
Skyworks Solutions's revenue has been declining over the last three years, dropping by 1.5% on average per year. This quarter, its revenue declined from $1.07 billion in the same quarter last year to $905.5 million. Semiconductors are a cyclical industry, and long-term investors should be prepared for periods of high growth followed by periods of revenue contractions (which can sometimes offer opportune times to buy).
This was a slow quarter for the company as its revenue dropped 15.5% year on year, in line with analysts' estimates. This could mean that the current downcycle is deepening.
Skyworks Solutions looks like it's headed into the trough of the semiconductor cycle, as it's guiding for a year-on-year revenue decline of 16.3% next quarter. Analysts are also estimating a 6% decline over the next 12 months.
When a company has more cash than it knows what to do with, buying back its own shares can make a lot of sense–as long as the price is right. Luckily, we’ve found one, a low-priced stock that is gushing free cash flow AND buying back shares. Click here to claim your Special Free Report on a fallen angel growth story that is already recovering from a setback.
Product Demand & Outstanding Inventory
Days Inventory Outstanding (DIO) is an important metric for chipmakers, as it reflects a business' capital intensity and the cyclical nature of semiconductor supply and demand. In a tight supply environment, inventories tend to be stable, allowing chipmakers to exert pricing power. Steadily increasing DIO can be a warning sign that demand is weak, and if inventories continue to rise, the company may have to downsize production.
This quarter, Skyworks Solutions's DIO came in at 138, which is one day above its five-year average. These numbers show that despite the recent increase, there's no indication of an excessive inventory buildup.
Key Takeaways from Skyworks Solutions's Q2 Results
It was encouraging to see Skyworks Solutions slightly beat analysts' revenue guidance expectations. On the other hand, its operating margin regrettably fell and its inventory levels increased. Overall, this was a mediocre quarter for Skyworks Solutions. The stock traded down 3.2% to $114 immediately following the results.
Skyworks Solutions may have had a tough quarter, but does that actually create an opportunity to invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.
