What's in the Cards for Qorvo (QRVO) This Earnings Season?

Zacks Equity Research
·4-min read

Qorvo QRVO is set to release second-quarter fiscal 2021 results on Nov 4.

In September 2020, the company had revised its revenue and sales guidance upward owing to increased demand for 4G and 5G mobile products utilized in flagship smartphones.

The company expects second-quarter fiscal 2021 revenues in the range of $1-$1.03 billion. The consensus mark for revenues is pegged at $1.01 billion, which suggests an improvement of 25.4% from the year-ago quarter’s reported figure.

Non-GAAP adjusted earnings are anticipated to be $2.14 per share at mid-point for the fiscal second quarter. The Zacks Consensus Estimate for fiscal second-quarter earnings is also pegged at $2.14 per share, unchanged in the past 30 days. The figure indicates an improvement of 40.8% from the year-ago quarter’s reported figure.

Qorvo, Inc. Price and EPS Surprise

Qorvo, Inc. Price and EPS Surprise
Qorvo, Inc. Price and EPS Surprise

Qorvo, Inc. price-eps-surprise | Qorvo, Inc. Quote

Notably, the company’s earnings surpassed the Zacks Consensus Estimate in the last four quarters. It has a trailing four-quarter earnings surprise of 20%, on average.

Let’s see how things have shaped up prior to this announcement.

Factors Likely to Have Impacted Q2

The solid traction for Qorvo’s mid-high-band and ultra-high band front end modules (FEM), which have been powering 5G smartphone launches, is expected to have contributed to the company’s fiscal second-quarter performance. Solid uptake of Bulk Acoustic Wave (BAW) filters, with the reopening of economies, is expected to have had driven top-line growth.

Moreover, consistent momentum witnessed for Qorvo’s solutions in defense (advanced radars and other electronic warfare products) and connectivity (Wi-Fi 6 and emerging IoT application) is expected to have positively impacted fiscal second-quarter performance.

Notably, surge in remote work and e-learning trends due to the COVID-19 pandemic is driving demand for Wi-Fi 6 products, which is likely to have contributed to the company’s performance in the quarter to be reported.

Also, momentum seen in shipments of programmable power management and motor control solution is likely to contribute the top line numbers for the fiscal second quarter. The company’s programmable integrated circuits (ICs) are witnessing solid momentum driven by robust growth in data center, computing and gaming consoles.

Synergies from Custom MMIC, Decawave, Active-Semi and MEMS technology acquisitions have significantly expanded Qorvo’s capabilities and positions it well to benefit from growing demand for proximity awareness, secure payments and secure access for smartphones, automotive and IoT.

Moreover, robust adoption of the company’ Gallium nitride (GaN) amplifiers to support high-power applications and the deployment of Massive MIMO antennas is expected to have supported the IDP segment’s revenue growth in the quarter under review.  Rapid 5G base station deployments across the globe hold promise for the segment’s top-line growth.

Qorvo, which carries a Zacks Rank #1 (Strong Buy), expects IDP unit to report more than 50% year over year revenue growth and reach $300 million during second quarter of fiscal 2021. You can see the complete list of today's Zacks #1 Rank stocks here.

Also, increasing popularity of the company's products instill confidence in the stock. Notably, shares of the company have inched up 8.6% in the year-to-date period compared with the industry’s rise of 3.3%.

Nonetheless, declining trend in smartphone shipments is expected to have been a headwind. Per Gartner data, the global smartphone sales witnessed a decline of 20.4% in the second quarter of calendar 2020 and the downside is likely to have persisted due to the impact of the pandemic.

Qorvo expects increased sales of RF content expansion for 5G devices to lessen the negative impact from lesser smartphone shipments. Consequently, Qorvo expects Mobile Products (MP) division sales to improve sequentially in the to-be-reported quarter and reach around $640 million. Further, projected momentum in Apple’s AAPL new iPhone sales might have positively impacted revenue numbers in the quarter under review.

Yet, growing expenses on product development amid stiff competition from Skyworks SWKS and Broadcom AVGO in the radio frequency semiconductor market as are anticipated to have affected profitability in the fiscal second quarter.

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