Amkor Technology, Inc. AMKR reported third-quarter 2017 adjusted earnings of 23 cents per share, surpassing the Zacks Consensus Estimate by 4 cents.
Also, revenues of $1.14 billion surpassed the Zacks Consensus Estimate of $1.080 billion.
On a year-to-date basis, the stock has underperformed the industry it belongs to. It gained only 5.2% compared with the industry’s gain of 30.2%.
Amkor completed the acquisition of Europe's largest OSATS (Outsourced Semiconductor Assembly and Test Services) company, Nanium S.A in May 2017. Management stated that integration of NANIUM is well on progress and the deal expands Amkor presence in fan-out technology. By leveraging Nanium’s technology, Amkor will be able to strengthen its foothold in the fast-growing market of wafer-level packaging for smartphones, tablets and other applications.
Also, the company has been making efforts to channelize its resources in important growth areas like automotive and increased investments in Greater China. In this regard, Amkor invested huge amounts in the Shanghai factory and in the Greater China sales team to attract more business.
Moreover, the company remains optimistic about the growth in its automotive business. As per Market forecasts, automotive market will grow in high single digit in the coming years. The growth is expected to be driven by increasing electronic content. Given its attractive value proposition for automotive customers, the company is poised to benefit from it.
Revenues
Revenues of $1.14 billion increased 14.8% sequentially and 4.5% year over year. The increase was driven by strength in nearly all its end markets and solid execution.
Also, revenues came in above the Zacks Consensus Estimate of $1.080 billion and within the company’s guidance of $1.04-$1.12 billion.
Revenues by Product Lines
The revenue mix in terms of product lines is discussed below.
Advanced Products include flip chip scale packages, wafer-level chip scale packages and flip chip ball grid array packages. It accounted for approximately 49% of third-quarter revenues. Revenues increased 15.4% sequentially and 28.5% year over year.
In the quarter, shipments in the mobile communications market remained strong, driven by demand for wafer level, MEMS and advanced system package technologies.
Mainstream products include lead frame packages, substrate-based wirebond packages and MEMS packages. It accounted for the remaining 51% of third-quarter revenues. Revenues decreased 4.1% sequentially and increased 4.1% year over year.
Margins
Gross margin was 19.1%, increasing 60 basis points (bps) from the year-ago quarter. The increase was due to higher revenues and a favorable mix.
Non-GAAP operating expenses of $118.4 million increased 19.4% year over year. As a percentage of sales, selling, general and administrative expenses remained flat, while research and development expenses increased.
As a result, pro forma operating margin was 6.6%, down 120 bps year over year.
Net Income
Amkor generated second-quarter GAAP net income of $54.4 million or 23 cents compared with $60.1 million or 25 cents in the year-ago quarter.
Balance Sheet & Cash Flow
During the reported quarter, cash flow from operations was $214 million compared with $97 million in the prior quarter. Capex was $142 million against $183 million in the prior quarter. Free cash flow was 74 million against $43 million in the prior quarter.
Total cash, cash equivalents and restricted cash were $521.4 million in the third quarter, declining from $660 million in the prior quarter.
4Q Guidance
For the fourth quarter, Amkor expects revenues in the range of $1.05-$1.13 billion. The Zacks Consensus Estimate is pegged at $1.10 billion. Gross margin is expected within 17-18.5%. Earnings per share are expected in the range of 14-23 cents on a GAAP basis.
For full-year 2017, Amkor expects revenues of $4.13 billion. The Zacks Consensus Estimate is pegged at $4.08 billion. Gross margin is expected to be approximately 17.5% and earnings per share of 85 cents on a GAAP basis. Capital expenditure is expected to be approximately $550 million in 2017.
Amkor Technology, Inc. Price, Consensus and EPS Surprise
Amkor Technology, Inc. Price, Consensus and EPS Surprise | Amkor Technology, Inc. Quote
Zacks Rank and Other Stocks to Consider
Currently, Amkor carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the broader technology sector are NVIDIA Corporation NVDA and SMART Global Holdings, Inc. SGH, each sporting a Zacks Rank #1 (Strong Buy), while Applied Materials, Inc. AMAT, carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings per share growth rate for NVIDIA Corporation, SMART Global and Applied Materials is projected to be 11.2%, 15.0% and 17.1%, respectively.
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