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Here's How Skyworks Solutions Stomped the Street Last Quarter

By Anders Bylund - Jan 28, 2020 at 6:21AM

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The connectivity specialist is already enjoying surprisingly strong sales of 5G solutions, and that long-term growth story has only just begun.

On Thursday, networking-technology chip supplier Skyworks Solutions (SWKS -1.64%) reported results for the first quarter of its fiscal 2020. The numbers left the analysts' estimates in the dust, and management paired them with optimistic market commentary and rosy guidance.

Skyworks Solutions' first-quarter results by the numbers

Metric

Q1 Fiscal 2020

Q1 Fiscal 2019

Change

Analysts' Consensus Estimate

Revenue

$896 million

$972 million

(7.8%)

$881 million

GAAP net income

$257 million

$285 million

(9.8%)

N/A

Adjusted earnings per share (diluted)

$1.68

$1.83

(8.2%)

$1.65

Data source: Skyworks Solutions. GAAP = generally accepted accounting principles.

For the period, which ended Dec. 27, management had expected to deliver adjusted earnings near $1.65 per share on revenues in the neighborhood of $880 million. The bottom-line results were right in line with both the guidance target and analysts' estimates, but Skyworks' sales were far above expectations. Management attributed this revenue surprise to the successful launches of several flagship 5G-capable smartphones that use Skyworks' connectivity chips.

Three white dice spell out $G and a wireless signal symbol as a hand rolls the 4 over to spell 5G instead.

Image source: Getty Images.

5G, 5G everywhere

On the earnings call, CEO Liam Griffin reminded analysts and investors about how deeply engaged Skyworks is in the 5G market.

"Over time, we expect an incredible unit uptake outside of mobile where connected devices and things will be measured in tens of billions. And as we've noted in prior calls, 5G catalyzes new markets from IoT, autonomous transport, artificial intelligence, and high-definition streaming media," Griffin said. "Currently in the U.S., there are approximately eight networked devices per person, a number that is expected to climb to 14 devices by 2022."

Skyworks is a leading provider of connectivity chips in general, and an early supplier to the 5G device market in particular. The company's Sky5 5G platform has been adopted by leading smartphone makers such as Xiaomi, Oppo, Apple (AAPL 1.62%), and Samsung (OTC: SSNLF), and Skyworks is currently shopping this solution around to makers of Internet of Things devices. In the long run, the IoT market should dwarf the smartphone business in terms of driving sales of networking chips, so Skyworks is bending over backward to stake out a large market share in that space.

What's next?

Skyworks' fiscal second-quarter guidance points to earnings near $1.46 per share on sales of roughly $810 million. Both of these targets are approximately equal to the results posted in last year's fiscal second quarter, but your average analyst would have accepted drops to $1.40 per share and $788 million, respectively.

The stock has climbed 75% over the last 52 weeks. Skyworks now trades at a rather affordable 16 times forward earnings and 6.2 times trailing sales, positioning the stock to continue rising as its 5G-powered Internet of Things strategy plays out.

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