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Amkor Technology (AMKR) Beats on Q4 Earnings, Revenues

Zacks

Amkor Technology, Inc. AMKR reported fourth-quarter 2017 adjusted earnings of 24 cents per share, surpassing the Zacks Consensus Estimate by 5 cents.

Also, revenues of $1.15 billion surpassed the Zacks Consensus Estimate of $1.09 billion.

The company's shares have lost 9% in the past 12 months, underperforming the industry’s gain of 8.1%.


Amkor completed the acquisition of Europe's largest OSATS (Outsourced Semiconductor Assembly and Test Services) company, Nanium S.A. in May 2017. Management stated that the integration of NANIUM is now complete and the deal expands Amkor’s presence in fan-out technology. The company has transferred NANIUM process to its K5 facility and has expanded capacity in the Porto facility.

Also, the company has been making efforts to channelize its resources in important growth areas like automotive and increased investments in Greater China. In this regard, Amkor invested huge amounts in the Shanghai factory and Greater China sales team to attract more business.

Moreover, the company remains optimistic about growth in its automotive business. Per Market forecasts, automotive market will grow in high single-digit in the coming years. The growth is expected to be driven by increasing electronic content. Given its attractive value proposition for automotive customers, the company is poised to benefit from it.

Revenues

Revenues of $1.15 billion increased 1.2% sequentially and 12.4% year over year. The increase was driven by strength in nearly all its end markets, particularly mobile communications, and solid execution.

Also, revenues came in above the Zacks Consensus Estimate of $1.09 billion and company’s guidance of $1.05-$1.13 billion.

Revenues by Product Lines

The revenue mix in terms of product lines is discussed below.

Advanced Products include flip chip scale packages, wafer-level chip scale packages and flip chip ball grid array packages. It accounted for approximately 51% of fourth-quarter revenues. Revenues increased 4.9% sequentially and 28.8% year over year.

In the quarter, shipments in the mobile communications market remained strong, driven by demand for wafer level, MEMS and advanced System-in-Package technologies.

Mainstream products include lead frame packages, substrate-based wire bond packages and MEMS packages. It accounted for the remaining 49% of fourth-quarter revenues. Revenues decreased 2.4% sequentially and 0.7% year over year.

Margins

Per the press release, gross margin was 19.6%, up 50 basis points (bps) sequentially but down 260 bps from the year-ago quarter.

The sequential increase was due to higher revenues. Also the completion of factory consolidation in Japan aided the gross margins in the quarter.

Operating expenses of $118.4 million increased 14.8% year over year. As a percentage of sales, both selling, general and administrative expenses, and research and development expenses increased.

As a result, operating margin was 9.6%, down 280 bps from the prior-year quarter.

Balance Sheet & Cash Flow

During the reported quarter, cash flow from operations was $204 million compared with $214 million in the prior quarter. Capex was $137 million compared with $142 million, whereas free cash flow was $76 million compared with $74 millionin the prior quarter.

Total cash, cash equivalents and restricted cash were $598.4 million in the fourth quarter, up from $521.4 million in the prior quarter.

1Q Guidance

For the first quarter, Amkor expects revenues in the range of $0.98-$1.06 billion, up 12% year over year. The Zacks Consensus Estimate is pegged at $1.02 billion. Gross margin is expected within 14-16%. Earnings per share are expected in the range of (2 cents)-11 cents on a GAAP basis.

Amkor Technology, Inc. Price, Consensus and EPS Surprise

Amkor Technology, Inc. Price, Consensus and EPS Surprise | Amkor Technology, Inc. Quote

Zacks Rank and Other Stocks to Consider

Amkor carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the technology sector are PetMed Express PETS, Teradyne TER and Mercadolibre MELI. While PetMed and Teradyne sport a Zacks Rank #1 (Strong Buy), Mercadolibre carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings per share growth rate for PetMed, Teradyne and Mercadolibre is projected to be 10%, 12% and 25%, respectively.

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