Following the upgrade in guidance for the second quarter of fiscal 2010 by management, estimates for Skyworks Solutions Inc (SWKS) have been on the rise. Skyworks Solutions designs, manufactures and markets a broad range of high performance analog and mixed-signal semiconductors that enable wireless connectivity.
Management guided towards revenues of $230 million – $235 million, up from the previous forecast of $225 million, driven by strong demand for mobile, Internet, smart grid and new, high-growth analog applications. Earnings per share for the second quarter are projected between 22 cents and 23 cents, up from the earlier estimate of 21 cents.
Agreement – Estimate Revisions
For fiscal 2010 (ending September), four of the nine analysts covering the stock raised their estimates in the last 30 days following management’s upgrade in guidance. There was no revision in the opposite direction.
For fiscal 2011, five of the eight analysts covering the stock raised their estimates, with no revisions in the opposite direction.
For the quarter (ending March), five of the nine analysts covering the stock raised their estimates, with no revisions in the opposite direction.
Magnitude Consensus Estimate Trend
The current Zacks Consensus Estimate for 2010 is 87 cents, up two cents in the last 30 days following management’s upgrade in guidance.
For fiscal 2011, the current Zacks Consensus Estimate is $1.05, up three cents in the last 30 days and signaling a 20.25% year-over-year growth in the bottom-line.
Skyworks has constantly exceeded expectations. In the first quarter, the company delivered a positive surprise of 4.76% and a positive surprise of 55.56% in the fourth quarter of 2009. On an average, the company has come ahead of the Zacks Consensus Estimate by 32.13% in the last four quarters.
The current Zacks Consensus Estimate for the third quarter is 18 cents, up one cent in the last 30 days, with an upside potential of 5.56%.
Skyworks Should Outperform
Skyworks is well positioned to benefit from the recent trends in the handset market, which are favorable for increasing dollar content for RF components. In general, the increasing complexity of higher-end phones offering multi-band communication across various air standards are expanding the market for Skyworks’ products due to the need for backward compatibility from 3G to 2G networks.
There is a significant growth opportunity in the handset markets propelled by the launch of 3G in China. Another favorable trend is the continued shift towards multi-mode modules, which save board space in a handset, generating higher margins. The company has tie-ups with major original equipment manufacturers (OEMs) that underscore the company’s success in gaining market share.
Our long-term recommendation for Skyworks is Outperform.
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