Skyworks Solutions (SWKS, Financial) designs, develops, manufactures, and markets analog and mixed signal semiconductors globally. It has a rich product portfolio that includes amplifiers, attenuators, battery chargers, circulators, DC/DC converters, and more.
The stocks have outperformed NASDAQ this year by a whopping 9 times, having gained close to 30% year-to-date, and the recently reported results show that the company isn’t losing steam anytime soon. Let’s take a look at the recently reported results and its growth prospects.
Looking back
Skyworks Solutions reported a strong second-quarter fiscal 2015 results, primarily on the back of execution of operational plans and also surge in demand of its products. The company reported revenues of $762.1 million, representing a 58% year-over-year growth and exceeded its guidance of $750 million. Analysts were expecting $751 million. This was on the back of strong demand from global mobile connectivity landscape, demand for high-performance solutions across a diverse market segments and Internet of Things. Power amplifiers contributed 31% to revenue whereas integrated mobile systems and broad markets represented 47% and 22%, respectively.
Due to handsome top-line growth, earnings came in at $1.15 per share versus $0.62 per share in the comparable quarter in the prior year and beat its own guidance by $0.03 per share. Skyworks returned $73 million to shareholders by way of dividend and stock repurchases, and declared a dividend of $0.13 per share.
Growth divers
Global proliferation of connectivity is one of the long-term growth drivers for the company. Connectivity and switching solutions are extremely important for major smartphone platforms. In addition, the company is leveraging its architectural and integration leadership, expanding profitability while delivering greater value for its customers.
The company’s strategy of dual H strategy of providing leadership and custom integrated solutions, while continuing to diversify into high-margin verticals, is yielding great results. More than 2/3 of revenue comes from integrated mobile systems and broad markets, fueling better financial returns, and putting company on a clear path towards 50% gross margins and above.
According to a recent report, mobile data usage grew by 69% last year, driven by proliferation of smartphones and other interconnected devices within the Internet of Things, along with the adoption of high data rate services like 4G, LTE and 802.11ac.
End Users are upgrading to more powerful devices and bigger data plans on a faster connection. As a result, the OEM’s are investing to provide leading-edge performance solutions, creating a market opportunity that is growing at a mid-teens pace for the foreseeable future. Skyworks is growing even at a faster clip and three major dives are -- explosion in RF and analog complexity, rapidly expanding our footprint within existing customers and existing markets and leveraging decades of experience in mobile.
Looking Forward
Skyworks is well positioned to make the most of the opportunities that unfurl due to growth of Internet of Things, with a robust demand for high-performance wireless solutions in new and emerging markets. On the back of a strong product innovation and broad-based customer demand, the company looks all set to sustain above-market growth going forward.
The company expects the third-quarter revenues to be in the band of $800 million while gross margin is expected to be around 48%. Earnings per share are expected to be in the range of $1.28.
The company remains quite optimistic about prospects for the remainder of 2015 and beyond.
Final words
With a forward P/E of 16.26 versus the ailing P/E of 32.62, it is clear that analysts are expecting a good growth for the company. In fact, the company has witnessed 14 upwards revisions in EPS during the last 30 days. Growth during the next five years is expected to be at a CAGR of 21.28%, well ahead of 13.14% for the sector and 7.23% for S&P500.
Hence, Skyworks is a long-term buy.
