Amkor Technology (AMKR) Q1 Earnings Miss, Revenues Beat

Amkor Technology, Inc. (NASDAQ:AMKR) reported first-quarter 2018 adjusted earnings of 4 cents per share, missing the Zacks Consensus Estimate by a penny.

Revenues of $1.025 billion slightly surpassed the Zacks Consensus Estimate of $1.020 billion.

The company's shares have lost 26% in the past 12 months, underperforming the industry’s gain of 24.2%.

The company has been making efforts to channelize its resources in important growth areas like automotive and increased investments in Greater China. In this regard, Amkor invested huge amounts in the Shanghai factory and Greater China sales team to attract more business.

Moreover, the company remains optimistic about growth in its automotive business. Per market forecast, the automotive market will grow in high single digits in the coming years. The growth is expected to be driven by increasing electronic content. Given its attractive value proposition for automotive customers, the company is poised to benefit ahead.

Revenues

Revenues of $1.025 billion decreased 10.9% sequentially but increased 14% year over year. The year-over-year increase was driven by strength in nearly all its end markets, particularly automotive. The sequential decline was due to weakness in the communication market.

Also, revenues came in above the Zacks Consensus Estimate of $1.020 billion and within the company’s guidance of $0.98-$1.06 billion.

Revenues by Product Lines

The revenue mix in terms of product lines is discussed below.

Advanced Products include flip chip scale packages, wafer-level chip scale packages and flip chip ball grid array packages. It accounted for approximately 47% of first-quarter revenues. Revenues decreased 18.2% sequentially but increased 26.6% year over year.

Mainstream Products include lead frame packages, substrate-based wire bond packages and MEMS packages. It accounted for the remaining 53% of first-quarter revenues. Revenues decreased 3.3% sequentially but increased 5% year over year.

Margins

Per the press release, gross margin was 15.4%, up 30 basis points (bps) from the year-ago quarter. The increase was backed by higher revenues. Also, the completion of factory consolidation in Japan aided gross margins in the quarter.

Operating expenses of $121.7 million increased 3.2% year over year. As a percentage of sales, both selling, general and administrative expenses, and research and development expenses decreased.

As a result, operating margin was 3.5%, up 150 bps from the prior-year quarter.

Balance Sheet & Cash Flow

During the reported quarter, cash flow from operations was $147.6 million compared with $204 million in the prior quarter. Capex was $230.6 million compared with $137 million in the prior quarter.

Total cash, cash equivalents and restricted cash were $497.2 million in the first quarter, up from $598.4 million in the prior quarter. The company improved its net debt position from over $1 billion in 2015 to around $750 million at the end of 2017.

2Q Guidance

For the second quarter, Amkor expects revenues in the range of $990 million to $1.07 billion, up 2% year over year. The Zacks Consensus Estimate is pegged at $1.07 billion. Gross margin is expected within 14-16%. Earnings per share are expected in the range of (2 cents)-10 cents on a GAAP basis.

Zacks Rank and Stocks to Consider

Amkor carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the technology sector are Internap Corporation (NASDAQ:INAP) , Etsy, Inc. (NASDAQ:ETSY) and Lam Research (NASDAQ:LRCX) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term earnings per share growth rate for Internap, Etsy and Lam Research is projected at 2%, 17.3% and 17.7%, respectively.

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