Qorvo (QRVO) Gears Up For Q2 Earnings: What's In Store?

Qorvo, Inc. (NASDAQ:QRVO) is set to report second-quarter fiscal 2020 results on Oct 1. Notably, the company’s earnings surpassed the Zacks Consensus Estimate in the trailing four quarters, the average positive earnings surprise being 12.6%.

Q1 Performance

In fiscal first quarter, Qorvo delivered non-GAAP earnings of $1.36 per share, which surpassed the Zacks Consensus Estimate of $1.15 and rallied 41.7% from the year-ago quarter’s figure.

Revenues on a non-GAAP basis increased 11.9% year over year to $775.6 million. Moreover, the figure was above management’s guidance of $730-$750 million. Further, the top line outpaced the Zacks Consensus Estimate of $740 million.

What to Expect in Q2

For fiscal second quarter, Qorvo anticipates revenues between $745 million and 765 million. Earnings are projected to be $1.30 per share at mid-point. Management anticipates quarterly revenues to be impacted by seasonal ramps from the top customer, which will be offset by lower sales to Huawei.

The Zacks Consensus Estimate for fiscal second-quarter earnings is pegged at $1.30 per share, unchanged for the past 30 days. The figure indicates a decline of 25.7% from the year-ago quarter’s reported figure. The Zacks Consensus Estimate for revenues stands at $754.4 million, which suggests a decline of 14.7% from the year-ago quarter’s reported figure.

Let’s discuss the factors that are likely to get reflected on the upcoming quarterly results.

Factors at Play

Solid demand for Qorvo’s performance-tier for RF Fusion based solutions is likely to have driven its top line in the to-be-reported quarter. Also, the quarterly results are expected to show benefits from antenna tuning, discrete components and Bulk Acoustic Wave (BAW) based multiplexers.

Moreover, robust growth in the company’s wireless connectivity, improvement in base station solutions and robust 5G infrastructure market demand might have made a positive impact on the company’s performance in fiscal second quarter.

Further, strong demand for the company’s solutions in defense (advanced radars and other electronic warfare products) and connectivity (Wi-Fi and emerging IoT applications) is another positive. Rapid adoption of GaN for high-power applications, radars and other electronic warfare products are expected to have contributed to the to-be-reported quarter’s revenues.

Recently, the company expanded GaN shipments into S-band (2-4 GHz) and C-band (4-8 GHz) applications for defense radar programs. Further, the company was chosen to supply GaN amplifiers for low Earth orbit satellites by Syrlinks to aid OneWeb space-based internet connectivity globally.

Qorvo was also selected by Samsung (KS:005930) to offer antenna tuning, high-band PAD and Wi-Fi iFEM for mass market Galaxy A series.

Further, the company increased shipments of 5G massive MIMO infrastructure solutions to various OEMs. It also secured new design wins across all sub-6 GHz 5G frequency bands.

Notably, Qorvo sampled BAW-based 5G antennaplexer solutions to enable customers in utilizing antenna architectures for 5G devices.

Accelerated deployment of 5G bodes well for Qorvo. The company has participated in many 5G field trials and demonstrations.

In the quarter under review, Qorvo acquired Active-Semi International, Inc to strengthen its portfolio of programmable analog and mixed signal power offerings.

In fact, the company anticipates the buyout to bolster its addressable markets by approximately $3 billion. Post the acquisition, financials of Active-Semi will be reported under Qorvo’s Infrastructure and Defense Products (IDP) operating segment.

IDP revenues grew double digit year over year to $219 million, which marked the 13th consecutive quarter of growth.

Further, Mobile Products revenues in the second quarter are expected increase sequentially.

However, customer concentration, particularly from Apple (NASDAQ:AAPL) and Huawei, is a significant headwind. Further, management expects IDP revenues to decline year over year and sequentially, primarily due to restriction from supplying products to Huawei and its affiliates.

What Does the Zacks Model Say?

Our proven model doesn’t conclusively predict an earnings beat for Qorvo this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here.

Earnings ESP: The Earnings ESP for Qorvois 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Qorvo currently carries a Zacks Rank of #3.

Stocks With Favorable Combination

Here are a few stocks you may want to consider as our model shows that these have the right combination of elements to post an earnings beat.

Advanced Micro Devices, Inc (NASDAQ:AMD) has an Earnings ESP of +6.54% and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Altria Group, Inc (NYSE:MO) has an Earnings ESP of +1.75% and a Zacks Rank #3.

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