Skyworks Solutions (SWKS) Stock Gains on Earnings Beat, Strong Guidance

NEW YORK (TheStreet) -- Shares of Skyworks Solutions (SWKS) were gaining 5.7% to $97.50 Friday after the chipmaker beat analysts' estimates for earnings in the fiscal second quarter.

Skywork Solutions reported earnings of $1.15 for the second quarter, above analysts' estimates of $1.13 a share for the quarter. Revenue increased 58.4% year over year to $762.1 million for the quarter, beating analysts' estimates of $751.83 million.

The company said it expects earnings of $1.28 a share and revenue of $800 million for the fiscal third quarter. Analysts expect the company to report earnings of $1.19 a share and revenue of $781.81 million for the fiscal third quarter.

"Skyworks outperformance underscores the success of our diversification strategy, as positive momentum across our customer base, end markets and product lines helped to mitigate normal March quarter seasonality," Chairmand and CEO David J. Aldrich said.

Insight from TheSteet's Research Team:

Skyworks Solutions is a part of Bryan Ashenberg's GrowthSeeker.com Portfolio. Here is what Bryan had to say about the stock in a recent alert:

Management guided fiscal third-quarter revenue to $800 million (up 36% year over year), ahead of Wall Street's forecast of $781 million. Third-quarter EPS are now projected to be $1.28, ahead of the consensus estimate of $1.19, and gross margin was targeted to be 48%, up 130 basis points sequentially. Management expect margins will trend positively over the course of 2015. The company continues to see itself on a path to $7 in annualized EPS over the next couple of years, with a 50%+ gross margin. The company is now forecasting a 55%+ incremental gross margins, up from 52%.

For the second quarter, the company's gross margin totaled 46.7%, up 200 basis points year over year and flat vs. the prior quarter, though ahead of guidance of 46% to 46.5%. Its operating margin of 34% is up a robust 690 basis points year over year, and compares to 35% last quarter. For the second quarter, power amplifiers represented 31% of revenue, integrated mobile systems 47%, and broad markets 22%. Revenue from the company's broad markets, which serve the connected home, networking, media, automotive, and medical markets, grew 27% year to date, well ahead of the analog market.

The company said that its SkyOne Ultra front-end module has been designed into Samsung's GS6, which combined with strength at Apple (AAPL:Nasdaq) to allow the company to outperform despite some softness in the Chinese smartphone market. Management expect the migration to 4G/LTE technologies in China will continue and believe 4G smartphones in China will ramp up from around 100 million units in 2014 to a range of 225 million to 250 million in 2015.

Skyworks' balance sheet remains strong as well. The company generated $155 million in cash from operations during the quarter. Cash now totals $1.054 billion, or $5.40 per share, with no debt.

We have been steadfast believers in the mobile-device megatrend and of wireless connectivity spreading far beyond current applications. Skyworks is everywhere, and continues to diversify its business into broad markets, leading to less seasonality and higher profits. We remain confident that Skyworks is an excellent long-term play on this trend, that its growth outlook is strong and that its visibility is improving.

Skyworks continues to support our thesis that it pays to own a quality name, as the company remains incredibly well positioned to continue to post gains in a healthier end market and in the new world of the Internet of Things.

 -Bryan Ashenberg, "Skyworks' Guidance Is Better Than Expected," originally publiched on 5/01/15 on GrowthSeeker.com

TheStreet Ratings team rates SKYWORKS SOLUTIONS INC as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:

"We rate SKYWORKS SOLUTIONS INC (SWKS) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, expanding profit margins and good cash flow from operations. We feel these strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared to such things as earnings and book value."

You can view the full analysis from the report here: SWKS Ratings Report

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