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What to Expect from Skyworks and Qorvo’s Earnings

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Skyworks and Qorvo’s profit margins

Apple’s (AAPL) RF (radio frequency) chip suppliers, Skyworks (SWKS) and Qorvo (QRVO) have strong long-term growth potential due to 5G technology. Before 5G growth begins in calendar 2020, the companies will likely see declines in calendar 2019 amid weak smartphone demand, especially for iPhones in China. The weakness will likely be reflected in the profit margins.

Skyworks and Qorvo’s EPS

Qorvo’s non-GAAP (generally accepted accounting principles) EPS rose 9% YoY to $1.85 in the third quarter of fiscal 2019, which beat analysts’ estimate of $1.7. Even Skyworks’ EPS in the first quarter of fiscal 2019 fell 8.5% YoY to $1.83, which missed analysts’ estimate of $1.85. The EPS fell due to weak demand from Apple.

Qorvo’s EPS guidance for the fourth quarter of fiscal 2019 of $1.05 missed analysts’ estimate of $1.33 by 21%. Skyworks’ EPS guidance for the second quarter of fiscal 2019 of $1.43 missed analysts’ estimate of $1.51.

Since the two companies have different fiscal years, we have used calendar years for the annual EPS estimates to make the two figures comparable. For calendar 2019, analysts expect Skyworks’ EPS to fall 8.4% YoY before rising 13.4% in calendar 2020. Analysts expect Qorvo’s EPS to rise 2.55% YoY in calendar 2019 and 11.6% in calendar 2020.

Amid the bearish market environment, Goldman Sachs analyst Toshiya Hari sees smartphone demand stabilizing. He upgraded Qorvo to “buy” from “neutral.”

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