Skyworks Comfortably Beats Q3 Earnings on Higher Revenues

Skyworks Solutions Inc SWKS reported strong third-quarter fiscal 2014 results, exceeding its guidance across all key metrics on superior execution of operational plans. The company recorded net income of $111.4 million or 58 cents per share in the reported quarter, up from $65.7 million or 34 cents per share in the year-earlier quarter. The healthy year-over-year increase in earnings was primarily driven by higher revenues.
 
Excluding non-recurring items, adjusted earnings for the reported quarter came in at 83 cents per share compared with 54 cents in the year-ago quarter. Adjusted earnings for the reported quarter comfortably beat the Zacks Consensus Estimate of 71 cents.
    
Skyworks reported revenues of $587.0 million, up 34.6% year over year and ahead of the Zacks Consensus Estimate of $570 million. Skyworks continues to capitalize on the global mobile connectivity and demand for high-performance solutions across a diverse set of vertical markets and Internet of Things. During the reported quarter, the company launched six new products supporting MediaTek's first 4G chipset with an aim to tap the Chinese market. The company is benefiting from the growing need for analog chips that can handle higher data rate connectivity standards in smartphones.

Gross profit was $264.2 million in the reported quarter compared with $188.2 million in the year-ago period. Operating income improved to $148.5 million from $84.3 million in the prior year.

The company generated $199 million cash from operations and ended the quarter with cash and cash equivalents of $893.3 million. Skyworks repurchased approximately 1 million shares during the reported quarter. The company decided to initiate a quarterly dividend payout to provide attractive risk-adjusted returns to its stockholders. The cash dividend of 11 cents per share will be paid on Aug 21, 2014 to shareholders of record at the close of business on Aug 7.

Outlook
    
Moving forward, Skyworks is well positioned to capitalize on the Internet of Things with a healthy demand for high-performance wireless solutions in new markets. Revenues for the fourth quarter of fiscal 2014 are expected to be approximately $680 million, up 43% year over year. Skyworks also expects adjusted earnings per share to increase 56% year over year to $1.00 in the fourth quarter.

The company believes that its strategy of diversifying its business and expanding into new verticals will drive growth in the long term. Based on its product innovation and broad customer demand, the company is poised for sustainable above-market growth in the near term.

Skyworks currently has a Zacks Rank #1 (Strong Buy). Other stocks that look promising and are worth a look include Broadcom Corp BRCM, carrying a Zacks Rank #1 (Strong Buy), and Marvell Technology Group Ltd. MRVL and Analog Devices, Inc ADI, both carrying a Zacks Rank #2 (Buy).