A month has gone by since the last earnings report for Skyworks Solutions (SWKS). Shares have added about 7.5% 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 Q4 Earnings Meet Estimates, Revenues Down Y/Y

Skyworks Solutions reported non-GAAP earnings of $1.55 per share in fourth-quarter fiscal 2024, beating the Zacks Consensus Estimate by 1.97% and declining 29.5% year over year.

Revenues of $1.02 billion dipped 15.9% on a year-over-year basis but surpassed the consensus mark by 0.31%.

Mobile revenues contributed nearly 65% to total revenues and increased 21% sequentially. This growth was attributed to the normalization of customer orders and inventory levels, as well as support for seasonal product ramps.

In the fourth quarter of fiscal 2024, Skyworks gained design wins in 5G for premium Android smartphones and increased its Wi-Fi 7 pipeline with major partners like Linksys, Charter, and NETGEAR. 

The company expanded in automotive for 5G front-end modules, infotainment, and digital isolators, showing increased design win momentum.

Broad markets contributed nearly 35% to total revenues and up $1 million sequentially. It showed signs of stabilization with demand in edge IoT and automotive electrification, supported by increasing adoption of Wi-Fi 6E and Wi-Fi 7 systems.

SWKS Operating Details

Non-GAAP gross margin contracted 70 basis points (bps) on a year-over-year basis to 46.5%.

Research & development expenses, as a percentage of revenues, increased 390 bps year over year to 16%.

Selling, general and administrative expenses increased 120 bps to 7.2% in the reported quarter.

Non-GAAP operating margin contracted 600 bps on a year-over-year basis to 26.7% in the reported quarter.

SWKS Balance Sheet & Cash Flow

As of Sept. 27, 2024, cash & cash equivalents and marketable securities were $1.57 billion compared with $1.28 billion as of June 28, 2024.

Long-term debt was $994.3 million as of Sept. 27, 2024, compared with $994 million as of June 28, 2024.

Cash generated by operating activities was $476 million in the quarter under discussion compared with $273.5 million in the prior quarter.

Free cash flow was $393.2 million, with a 38.4% free cash flow margin.

Skyworks paid dividends worth $112 million in the reported quarter.

SWKS Initiates 1Q25 Guidance

For the first quarter of fiscal 2025, the company expects revenues between $1.05 billion and $1.08 billion, up 4% sequentially at the mid-point.

Non-GAAP diluted shares are expected to be $1.57 per share.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review.

The consensus estimate has shifted -7.19% due to these changes.

VGM Scores

Currently, Skyworks has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% 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

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Skyworks has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.

Performance of an Industry Player

Skyworks is part of the Zacks Semiconductors - Radio Frequency industry. Over the past month, Qorvo (QRVO), a stock from the same industry, has gained 5.3%. The company reported its results for the quarter ended September 2024 more than a month ago.

Qorvo reported revenues of $1.05 billion in the last reported quarter, representing a year-over-year change of -5.2%. EPS of $1.88 for the same period compares with $2.39 a year ago.

Qorvo is expected to post earnings of $1.20 per share for the current quarter, representing a year-over-year change of -42.9%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.

Qorvo has a Zacks Rank #5 (Strong Sell) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.

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