Why Skyworks Solutions Stock Sank This Week

Skyworks’ recent quarterly profits beat expectations, but investors are worried about the future sales picture.

Skyworks Solutions (SWKS 3.11%) stock lost ground this week following the release of results for the second quarter of the company’s current fiscal year, which ended March 29. The connectivity technologies specialist’s share price ended this week’s trading down 11.3% from last week’s market close, according to data from S&P Global Market Intelligence.

Skyworks published its Q2 results after the market closed on April 30, posting earnings that beat the market’s target and sales that were in line with Wall Street’s expectations. Despite posting a bottom-line beat, the company’s forward guidance caused investors to sell out of the stock.

Skyworks’ sales are slipping

Skyworks recorded non-GAAP (adjusted) earnings per share (EPS) of $1.55 on sales of $1.05 billion in fiscal Q2. Meanwhile, the average-analyst estimate had called for adjusted per-share earnings of $1.52 on sales of $1.05 billion in the period.

Revenue was down 8.7% year over year in the quarter, and management pointed to lower-than-expected demand in the mobile segment as a key factor driving the sales dip. It looks like sales declines are poised to continue in the near term.

Q3 guidance spooked Skyworks shareholders

For the third quarter of its current fiscal year, Skyworks is guiding for per-share earnings of $1.21 on revenue of roughly $900 million. Prior to the recent earnings release, the average Wall Street target had called for the business to post earnings per share of $1.46 on sales of $1.02 billion.

Skyworks Q3 guidance came in far below the market’s expectations and overshadowed the company’s earnings beat in Q2. If the company were to hit its sales target for the current quarter, that would mean recording a sequential quarterly sales decline of roughly 14%. Similarly, hitting that mark would mean a roughly 16% sales decline compared to the approximately $1.07 billion in revenue that it recorded in fiscal Q3 last year. Adjusted earnings are also projected to fall roughly 16% year over year in the current quarter.

Keith Noonan has no position in any of the stocks mentioned. The Motley Fool recommends Skyworks Solutions. The Motley Fool has a disclosure policy.

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