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Qorvo (QRVO) to Report Q1 Earnings: What's in Store?

Qorvo Inc. QRVO is set to release first-quarter fiscal 2018 earnings on Aug 2.

The company has a mixed record of earnings surprises. Despite missing two of the trailing four quarters, Qorvo has delivered an average positive surprise of 1.38%.

In the last quarter, the company’s earnings (including stock-based compensation) were 74 cents per share, which was in line with the Zacks Consensus Estimate. However, adjusted revenues of $643 million lagged the Zacks Consensus Estimate of $645 million.

Qorvo expects non-GAAP revenues in first-quarter fiscal 2018 to be approximately $610–$650 million. Earnings are expected to be in the range of 70–90 cents per share. The company also provided optimistic view for fiscal 2018.

Qorvo, Inc. Price and EPS Surprise


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

Nevertheless, Qorvo underperformed the industry on a year-to-date basis. While the stock has returned 30.9%, the industry gained 33.6%.

The underperformance can be attributed to sluggish results that were negatively impacted by high inventory levels with handset manufacturers due to lower demand in China. Moreover, a reported delay in the launch of Apple’s AAPL iPhone 8 also affected the stock price.

Let’s see how things are shaping up for this announcement.

Factors to Consider

Notably, China accounts for almost 35% of Qorvo’s revenues. Per market research firm GFK, the overall growth of China’s smartphone will slow down in 2017, primarily due to depreciation of the yuan, rising cost of components and increasing competition.

According to its latest report, smartphone demand in China remained flat on a year-over-year basis at 110.1 million units in the second-quarter 2017. We believe that sluggish demand level in China will continue to impact Qorvo’s results in the going-to-be reported quarter.

However, improving market share at Samsung and Huawei – both  accounting for more than 10% customers in the last quarter – is positive. Management expects opportunities at Samsung to grow sequentially in the second quarter. Moreover, strong adoption of the latest Bulk Acoustic Wave (BAW) 5 product is expected to drive growth in the quarter.

Earnings Whispers

Our proven model does not conclusively show that Qorvo is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below.

Zacks ESP: Qorvo’s Earnings ESP is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 61 cents per share. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Qorvo has a Zacks Rank #3 which increases the predictive power of ESP. However, the company’s 0.00% ESP makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 and 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Stocks to Consider

Here are some companies you may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter.

Kemet Corporation KEM with an Earnings ESP of +11.11% and sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Vishay Intertechnology VSH with an Earnings ESP of +6.06% and sports a Zacks Rank #1.

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Qorvo, Inc. (QRVO): Free Stock Analysis Report
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Vishay Intertechnology, Inc. (VSH): Free Stock Analysis Report
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