Apple Inc's iPhone Beat Is Good for Cirrus Logic's Upcoming Earnings

Cirrus will release earnings Thursday. Apple's results favor it.

Apr 24, 2014 at 10:05AM

Cirrus Logic (NASDAQ:CRUS) is set to report its fourth-quarter earnings on Thursday right after its largest customer, Apple (NASDAQ:AAPL), reports Wednesday. With over 80% of its revenue derived from the Cupertino-based company, a lot of Cirrus Logic's results will be determined by Apple.

As growth at Apple has slowed, so has growth at Cirrus. The company lost the amplifier socket in the iPad Air last year, but still makes the chips for the faster-growing iPad mini as well as the iPhone. Still, Apple's move may put further pressure on Cirrus' pricing, continuing to push down margins this quarter.

With that in mind, let's take a look at what we can expect from Cirrus Logic on Thursday.

Stats on Cirrus Logic

Analyst EPS Estimate


Year-Ago EPS


Revenue Estimate

$143.01 million

Change From Year-Ago Revenue


Earnings Beats in Past 4 Quarters


Source: Yahoo! Finance.

Word on the Street
After Cirrus' disappointing outlook for the fourth quarter, analysts dropped their estimates from $0.49 to $0.32. The drastic fall in earnings estimates corresponded with an initial decline in stock price. Shares have recovered nicely, and now sit about 9.9% higher than before its third-quarter report. Comparatively, the S&P 500 is 4.7% higher than its January 28 close.

Cirrus is making a habit of beating analyst estimates, after lowering them with disappointing guidance. Last quarter, the company beat on both the top and bottom lines with earnings of $0.89 per share versus estimates for $0.77 per share. Revenue topped estimates of $212.95 million with sales of $218.9 million.

Despite the beats, both numbers represent a year-over-year decline. Moreover, Cirrus saw a decline in gross margin to 47.4% from 51% in the year-ago period.

This is likely a result of Apple weighing on its pricing structure. Cirrus lost the amplifier socket in the iPad Air last year, as Apple has become more focused on price and its own margin. Apple's gross margin has fallen nearly eight percentage points from its peak in 2012. The company is aiming to stabilize that number as its growth slows.

For Apple's second quarter, the company reported gross margin of 39.3% on the back of 43.7 million iPhone sales and 16.4 million iPad sales.

That iPhone number is well above expectations of 37.7 million, but the iPad's missed by more than 3 million units. This mix, however, strongly favors Cirrus Logic's revenue number. The weight of the iPhone mitigates the affect of losing the iPad Air socket.

Cirrus could still benefit from diversifying away from Apple. It could also benefit from Apple diversifying its product line and releasing its long-rumored wearable. Cirrus' amplifier chips are especially suited for smaller form factors, and the company would likely be the first choice for Apple should it finally release the iWatch.

In the meantime, wearables are growing, but the competition for wearable amplifier sockets at other OEMs is fierce. Apple is Cirrus' best bet for wearables.

Foolish final words
When Cirrus reports, watch its gross margin for the impact of Apple's pricing pressure. Margins will give us a better indication than revenue, which is driven more by volume, of how Apple is affecting Cirrus' price.

Look to see if the company is having success in diversifying away from Apple with companies like Xiaomi in handsets, or in the emerging LED lightbulb space where it designs power controllers. This quarter, however, results will still be driven by Apple. So, I'd expect some good results based on what I heard Wednesday.

Bigger than phones, here's the biggest thing to come out of Silicon Valley in years
If you thought the iPod, the iPhone, and the iPad were amazing, just wait until you see this. One hundred of Apple's top engineers are busy building one in a secret lab. And an ABI Research report predicts 485 million of them could be sold over the next decade. But you can invest in it right now... for just a fraction of the price of AAPL stock. Click here to get the full story in this eye-opening new report.

Adam Levy owns shares of Apple. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple and Cirrus Logic. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers