Amkor Technology (AMKR) Down 28.7% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Amkor Technology (AMKR). Shares have lost about 28.7% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Amkor Technology due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Amkor's Q4 Earnings & Revenues Beat

Amkor Technology reported fourth-quarter 2019 earnings of 41 cents per share, beating the Zacks Consensus Estimate by 86.4%. Further, the figure significantly improved from 12 cents in the year-ago quarter. Further, the bottom-line grew 78.3% sequentially.

Revenues of $1.18 billion surpassed the Zacks Consensus Estimate by 7.6%. The top line was also higher than management’s guided range of $1.05 billion to $1.14 billion. Further, the figure improved 9% year over year and 8.7% sequentially.

The company witnessed solid demand for advanced packaging technologies in the consumer and mobile markets during the reported quarter, which drove the top line.

However, Amkor continued to witness sluggish performance in Mainstream product lines in the reported quarter.

Nevertheless, Amkor remains optimistic about growth opportunities related to 5G, which in turn is expected to strengthen its position in the communications market. Moreover, it is likely to drive momentum across RF module and power management areas.

Revenues in Terms of Product Lines

Advanced Products — which include flip chip scale packages, wafer-level chip scale packages and flip chip ball grid array packages — accounted for approximately 56.6% of fourth-quarter revenues. Revenues improved 18.3% year over year to $667 million.

Mainstream Products — which include lead frame packages, substrate-based wire bond packages and MEMS packages — accounted for the balance 43.4% of fourth-quarter revenues. Revenues declined 1.2% year over year to $511 million.

End-Market Details

The company operates in four end-markets namely — Communications, Computing, Consumer and Automotive, industrial and other. Notably, Communications, Computing, Consumer and Automotive, industrial and other contributed 37%, 14%, 24% and 25% to total revenues in the fourth quarter, respectively.

In communications market, the company continued to benefit from the launch of flagship phones. Further, increasing volume of Amkor’s advanced SiP technology drove the top line in the consumer market.

In automotive and industrial market, Amkor’s strengthening momentum across ADAS infotainment applications remained positive. Additionally, the company benefited from growing demand for advanced chips and modules, particularly for data center, in computing market.

Margins

Per management, gross margin of 18.9% expanded 200 basis points (bps) from the year-ago quarter. Further, it was higher than management’s guided range of 15-18%.

Operating expenses of $104.6 million decreased 2.2% year over year due to disciplined discretionary spending and manufacturing cost control. As a percentage of revenues, the figure contracted 100 bps from the year-ago quarter.

Notably, operating margin was 10%, which expanded 300 bps from the prior-year quarter.

Balance Sheet

As of Dec 31, 2019, cash equivalents and restricted cash was $895.6 million compared with $601.3 million as of Sep 30, 2019.

Further, long-term debt was $1.3 billion at the end of the fourth quarter compared with $1.2 billion at the end of the third quarter.

Guidance

For first-quarter 2020, Amkor expects revenues in the range of $1.08 billion to $1.16 billion.

Further, earnings are expected between 9 cents and 24 cents per share.

The company anticipates gross margin to lie within the range of 14.5-17.5%.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month. The consensus estimate has shifted 63.64% due to these changes.

VGM Scores

Currently, Amkor Technology has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. It comes with little surprise Amkor Technology has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.