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Skyworks Stock Falls 3% on Weak Q3 2019 Guidance

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Skyworks’s earnings highlights

Apple’s (AAPL) RF (radio frequency) chip supplier Skyworks (SWKS) reported double-digit YoY (year-over-year) falls as it was hit by weak smartphone sales. According to the IDC, global smartphone shipments fell 6.6% YoY (year-over-year) in the first quarter of 2019, with Apple’s iPhone shipments down 30.2% YoY. Qualcomm’s (QCOM) Mobile Station Modem chip shipments fell 17% YoY in the first quarter.

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Skyworks earns ~47% of its revenue from Apple and more than 70% of its revenue from the smartphone market. In the second quarter of fiscal 2019, Skyworks’s revenue fell 11.3% YoY to $810 million, slightly above the consensus estimate of $809.5 million. Its revenue fell as a decline in the smartphone market, especially in China, more than offset the gains in non-smartphone markets.

Skyworks’s non-generally accepted accounting principles EPS fell 2% YoY to $1.47 in the second quarter of fiscal 2019, beating the consensus estimate of $1.43.

Skyworks’s earnings hint that Qorvo (QRVO), Apple’s other RF supplier, might also beat its guidance for its fiscal 2019 fourth-quarter earnings results for the period that ended in March 2019. Qorvo expects its revenue to rise 0.8% YoY to $670 million in the fourth quarter of fiscal 2019.

Skyworks’s fiscal 2019 third-quarter earnings guidance

For the third quarter of fiscal 2019, which will end in June 2019, Skyworks expects its revenue to fall 7.7% YoY to $825 million at the midpoint, lower than the consensus estimate of $826.27 million. Although Skyworks’s revenue guidance reflects a sequential rise of 2%, the figure is lower than analysts’ expectation. The guidance miss indicates that Qorvo might also report slower-than-expected sequential growth.

The above guidance miss sent Skyworks and Qorvo down 3.5% and 2%, respectively, on May 3. Qorvo stock has already priced in weaker guidance. The stock will likely rise in the mid-single digits if the company reports better-than-expected guidance on May 6.

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