What’s in the Offing for Skyworks (SWKS) in Q4 Earnings?

Skyworks Solutions Inc. SWKS is set to release fourth-quarter fiscal 2017 results on Nov 6. The company beat the Zacks Consensus Estimate in the trailing four quarters, with an average positive surprise of 3.06%.

In the preceding quarter, the company delivered a positive earnings surprise of 3.97%. Moreover, Skyworks surpassed the Zacks Consensus Estimate for revenues in the last four quarters.

For fourth-quarter fiscal 2017, revenues are expected to rise 17% year over year to $980 million. Gross margin is expected at around 51%, while operating expenses are projected at $124 million. Earnings are anticipated at $1.75 per share, up 19%.

Notably, the stock has returned 49.7% year to date, outperforming the 41.4% rally of the industry.

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

Key Factors

We expect Skyworks to gain from Apple Inc.’s (AAPL) impressive fourth-quarter results, which reflected increasing unit volume sales of the company’s flagship device — iPhone. Apple accounts for almost 40% of the company’s top line.

Further, Qorvo Inc. QRVO recently reported that demand environment for smartphones has improved in China. As Skyworks has substantial presence among Chinese Original Equipment Manufacturers (OEMs), the rise in demand bodes well for the company.

Moreover, the company is expected to benefit from strong demand for Wi-Fi, Zigbee and LTE solutions. The demand for highly-integrated solutions is increasing as customers implement the next level of functionality for higher bandwidth. We believe Skyworks’ expanding product portfolio has the potential to address this rapidly growing need.

Additionally, the company’s expanding customer base, which comprises the likes of Cisco Systems Inc. CSCO in MIMO gateways, Nintendo in its Switch Gaming console, Fitbit, Garmin and LG, positions it well for growth.

However, intensifying competition is a concern.

Earnings Whisper

We believe Skyworks is unlikely to deliver a positive earnings surprise in fourth-quarter 2017 due to an unfavorable combination of Zacks Rank #4 (Sell) and an Earnings ESP of +0.03%.

This is because, as per our model, 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. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

We don’t recommend Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stock to Consider

Here is a stock you may consider as our proven model shows it has the right combination of elements to post an earnings beat this quarter.

NVIDIA Corporation NVDA has an Earnings ESP of +0.71% and a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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