Skyworks Reports 2016 Q4 Earnings

For anyone still interested in Skyworks, they reported their 2016 Q4 earnings earlier this week. In short: A beat on revenue and EPS expectations but still a YOY decline in both categories. Guidance was…okay.

Skyworks Solutions Inc. SWKS reported fourth-quarter fiscal 2016 non-GAAP earnings (including stock-based compensation) of $1.37 per share, which beat the Zacks Consensus Estimate by 4 cents but declined 1.7% from the year-ago quarter.

Earnings (excluding stock-based compensation) were $1.47 per share better than management’s guidance of $1.43.

Revenues of $835.4 million were down 5.2% year over year but ahead of its guidance and Zacks Consensus Estimate of $832 million.

Read more: http://www.nasdaq.com/article/skyworks-swks-beats-q4-earning…

Of course, the big news was that Skyworks attempted to a bid on Microsemi, a semiconductor manufacturer for industrial security and defense customers.

What’s the old saying, “if you can’t beat ‘em in a bidding war, buy ‘em?”

Microsemi Corp. (MSCC) has launched a sale process after Skyworks Solutions approached with a takeover bid, Bloomberg reported Wednesday.

A chipmaker, Microsemi has hired Bank of Montreal to advise on the process. Officials from Microsemi, Skyworks and Bank of Montreal declined comment on the possible acquisition, Bloomberg reported.

Attempting to branch out from its stagnating core phone market, Skyworks is targeting Microsemi to diversify its portfolio. About one quarter of Microsemi’s revenue is generated from defense and security clients, and industrial customers account for 21%, according to Bloomberg.

Read more: Microsemi Targeted by Skyworks (MSCC) | Investopedia http://www.investopedia.com/news/microsemi-targeted-skyworks…

Of course, we probably all remember that last year Skyworks lost a bidding war to Microsemi for PMC-Sierra.

Management guided for high single digit sequential revenue growth for next quarter and an extremely specific $1.58 EPS. That would basically be flat YOY in both those categories.

Here’s a look at Skyworks latest numbers:


Revenues (millions)		Q1		Q2		Q3		Q4			
2013				453.7		425.2		436.1		477.0		
2014				505.2		481.0		587.0		718.2		
2015				805.5		762.1		810.0		880.8
2016				926.8		775.1		751.7		835.4

EPS (non-GAAP)		        Q1		Q2		Q3		Q4			
2013				0.55		0.48		0.54		0.64		
2014				0.67		0.62		0.83		1.12	
2015				1.26		1.15		1.34		1.52
2016				1.60		1.25		1.24		1.47

2016 Q4 Earnings (Current):

Revenue Growth (millions)
2015 Q4 TTM Revenue = 3258.4
2016 Q4 TTM Revenue = 3289
Year Over Year Revenue Growth =1%, previous quarter 7.7%

EPS Growth (non-GAAP)
2015 Q4 TTM Earnings = 5.27
2016 Q4 TTM Earnings = 5.56
Year Over Year EPS Growth =5.5%, previous quarter 15.2%

P/E (Check Current Price) = 75.07/5.56 = 13.5

1YPEG = 13.5/5.5 = 2.45

Matt
Long SWKS
MasterCard (MA), Nestle (NSRGY), PayPal (PYPL), and Verizon (VZ) Ticker Guide
See all my holdings at http://my.fool.com/profile/CMFCochrane/info.aspx

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Thanks for this, Matt.

Given this information, are you of the opinion that growth has slowed so much that you no longer believe SWKS to be a good investment?

I have held onto my shares, even after many on this board sold their’s months ago, because the CEO, I believe, indicated that the 2d half of the year would be much better than the 1st half, and I’m not particularly sorry I have hung in there.

But now, looking forward, I’m not sure this is either a good shorter-term or even long-term investment.

I’m curious as to your thoughts, if you don’t mind sharing.

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Hi az5speedy.

I hope Matt weighs in.

I’m currently working on my quarterly deep dive analysis for Skyworks, which I’ll post here when it is complete. There seems to be enough Skyworks interest here even if Saul no longer owns it

I don’t think we have a ton of information right now to forecast how they will do as a long-term investment, other than to look at their history, understand the products (and services) they’re providing and the markets they’re serving, and decide for ourselves whether industry tailwinds and corporate execution are such that they merit a slice in our individual portfolios.

Revenue growth was terrific from fiscal 3Q14 through 4Q15, but that was fueled by a combination of the fruits of the Panasonic filter division joint venture/acquisition, and being in the sweet spot of an Apple product ramp. I don’t want to say we’ll never see growth like that again, but I will say that we can’t expect it on a regular basis. This calendar year has been living proof of that. Their growth will be lumpy and not typically as high as 3Q14-4Q15. Especially in the near-term, Skyworks’ growth will be influenced by how well Apple is doing, especially with their smartphones. But they have (in my opinion) a viable Internet of Things strategy as well. It is slowly eroding their reliance on the smartphone market in general and Apple in particular. I wish it were happening faster.

I’ll leave it there for now and get back to writing my deep dive analysis.

Thanks and best wishes,
TMFDatabaseBob (long: SWKS)
See my holdings here: http://my.fool.com/profile/TMFDatabasebob/info.aspx
Peace on Earth

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Thanks, Bob. I appreciate the information, and I am looking forward to your deep dive analysis.

az5speedy

AZ5Speedy,

Please understand I am not anything close to an expert on semiconductor stocks nor am I great investor by any stretch of the imagination.

Caveats out of the way, I am happily holding SWKS here. I believe it is relatively cheap and, though it will probably be lumpy, show decent growth over the years ahead. They are extremely profitable with a relatively safe and stable dividend and clean balance sheet.

In an investor presentation earlier this year, management provided tables that showed that as smartphones advanced in the years ahead (e.g. with 5G networks and beyond) that Skyworks would have higher and higher dollar content present in these future smartphones. Furthermore, as more and more devices get connected via the IOT, they should show decent growth in that area as well.

My greatest fear is that they get displaced in one of their major smartphone customers, like Apple. I don’t know how realistic that is, but I do know Apple and Samsung manufacture some chips and both have lots and lots of money they could throw at areas like this to bring those margins in house. I’m sure Bob could speak to that risk far better than I though.

Finally, if a decision might be imminent, I would definitely at least wait until Database Bob completes his terrific quarterly review before definitively deciding anything.

I hope this helps.

Matt
Long SWKS
MasterCard (MA), Nestle (NSRGY), PayPal (PYPL), and Verizon (VZ) Ticker Guide
See all my holdings at http://my.fool.com/profile/CMFCochrane/info.aspx

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