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Why Shares of Qorvo Inc. Jumped 13.8% in February

By Timothy Green – Mar 8, 2016 at 1:48AM

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Revenue fell hard during the company's third quarter, but an accelerated share repurchase program pushed the stock higher for the month.

What: Shares of RF solutions provider Qorvo (QRVO 0.68%) rose 13.8% in February, according to data provided by S&P Global Market Intelligence. While the company's fiscal third-quarter results were mixed, a combination of a rising stock market and the announcement of an accelerated share buyback program propelled shares higher.

Image source: Qorvo.

So what: Shares of Qorvo initially slumped following the company's earnings report on Feb. 4. Revenue of $620.7 million missed analyst estimates slightly, while non-GAAP EPS of $1.03 beat estimates by $0.09. Qorvo was formed by the merger of RF Micro Devices and TriQuint Semiconductor in early 2015, and compared to the combined revenue of those two companies during the prior-year period, Qorvo's revenue slumped 16.4% during its fiscal third quarter.

Shares started to rebound around the time Qorvo announced a $500 million accelerated share repurchase program on Feb. 17. The buyback program is expected to be completed during Qorvo's fiscal first quarter, and is part of the company's previous $1 billion share repurchase authorization announced in November of 2015. Following the completion of the accelerated program, roughly $250 million will remain for share repurchases.

Now what: Qorvo's rise during February was due in part to a rebounding stock market following a difficult start to 2016. Shares of Qorvo were down about 30% from the date of the completion of the merger that formed the company through the end of January, so a depressed stock price may have also played a role.

QRVO Chart

QRVO data by YCharts.

But the main driver appears to be the company's commitment to buying back a substantial number of shares over the next few months. With a market capitalization of about $6.8 billion, the accelerated buyback program would eliminate 7.3% of the company's shares at the current stock price. All buyback programs aren't created equal, but investors seem to approve of Qorvo's plan, and sent shares higher in February.

Timothy Green has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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.

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