Amkor Technology (AMKR) Q2 Earnings, Revenues Beat (revised)

Amkor Technology, Inc. AMKR reported second-quarter 2018 adjusted earnings of 14 cents per share, surpassing the Zacks Consensus Estimate by 9 cents.

Reported revenues of $1.066 billion beat the Zacks Consensus Estimate of $1.030 billion and were inline with the company’s guided range of $990 million to $1.07 billion.

The company's shares have lost 13.4% in the past 12 months, underperforming the industry’s decline of 1.4%.

The company has been making efforts to channelize its resources in important growth areas like MEMS and sensors business, which focuses on mobile and automotive applications. In this regard, Amkor recently added a third MEMS and sensor production line in Korea to attract more business.

The company remains optimistic about growth in the automotive business. Per market forecast, the automotive market will grow in high single digits 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 going ahead.

Revenues

Revenues of $1.066 billion increased 4% sequentially and 5.8% year over year. The increase was driven by strength in nearly all its end markets, particularly communications. The communications segment benefited from iOS ecosystem customers’ incremental demand.

Also, strong demand for advanced system-in-package (SiP), which was up 14% sequentially and 38% year over year, aided the revenue growth.

Revenues by Product Lines

The revenue mix in terms of product linesis 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 47% of second-quarter revenues. Revenues increased 4.2% sequentially and 11.5% year over year.

Mainstream Products include lead frame packages, substrate-based wire bond packages and MEMS packages. It accounted for the remaining53% of second-quarter revenues. Revenues increased 3.8% sequentially and 1.2% year over year.

Margins

Per the press release, gross margin was 15.9%, up 50 basis points (bps) sequentially but down 160 bps from the year-ago quarter. The sequential increase was backed by higher revenues.

Operating expenses of $115.8 million increased 3.3% year over year. As a percentage of sales, selling, general and administrative expenses increased, while research and development expenses decreased.

As a result, reported operating margin was 5.1%, up 1200 bps from the prior-year quarter.

Balance Sheet & Cash Flow

During the quarter under review, cash flow from operations was $59 million compared with $147.6 million in the last reported quarter. Capex was $669 million compared with $230.6 million in the first quarter. Free cash flow was negative $100 million compared with negative $83 million in the first quarter of 2018.

Total cash, cash equivalents and restricted cash were $382.3 million in the second quarter, down from $497.2 million in the last reported quarter. Long-term debt in the quarter was $1.2 billion.

Guidance

For the third quarter, Amkor expects revenues in the range of $1.10-$1.18 billion, up 7% sequentially. The Zacks Consensus Estimate is pegged at $1.15 billion. Gross margin is expected within 15-17%. Earnings per share are expected in the range of 12-23 cents on a GAAP basis.

Zacks Rank and Stocks to Consider

Currently, Amkor carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same industry include Groupon GRPN, IAC/InterActiveCorp IAC and Integrated Device Technology, Inc. IDTI. While Groupon and IAC/InterActiveCorp sport a Zacks Rank #1 (Strong Buy), Integrated Device holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth for Groupon, IAC/InterActiveCorp and Integrated Device is currently projected to be 3%, 7.5% and 12.4%, respectively.

(We are reissuing this article to correct a mistake. The original article, issued earlier today, July 31, 2018, should no longer be relied upon.)

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