Why Is Qorvo (QRVO) Down 6.4% Since Last Earnings Report?

It has been about a month since the last earnings report for Qorvo (QRVO). Shares have lost about 6.4% in that time frame, underperforming the S&P 500.Will the recent negative trend continue leading up to its next earnings release, or is Qorvo due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers. Qorvo's Q2 Earnings Surpass Estimates Despite Lower RevenuesQorvo reported relatively healthy second-quarter fiscal 2025 results, with both the top and bottom lines surpassing the Zacks Consensus Estimate. The company reported a revenue contraction year over year due to a net sales drop in the High-Performance Analog (HPA) vertical. Despite major improvements in channel inventory, the persistence of low demand in some key end markets impacted the top-line growth.Net IncomeOn a GAAP basis, the company reported a net loss of $17.4 million or a loss of 18 cents per share against a net income of $97.5 million or 99 cents per share in the prior-year quarter. The significant decline in year-over-year earnings is attributable to lower revenues and higher operating expenses.Non-GAAP net income was $179.8 million or $1.88 per share, down from $235.5 million or $2.39 per share in the year-ago quarter owing to soft revenues. Nevertheless, the bottom line surpassed the Zacks Consensus Estimate by 3 cents.RevenuesNet sales during the quarter declined to $1.05 billion from $1.10 billion in the prior-year quarter. The top line beat the Zacks Consensus Estimate of $1.03 billion. Despite significant improvement in inventory levels, demand in various end markets has yet to recover fully, which has impeded revenues.Macroeconomic headwinds also impacted the top line. Nevertheless, the company secured major deal wins for its ultra-wideband portfolio in a flagship Android smartphone and a leading German automotive manufacturer.Segment ResultsHPA contributed $148.3 million in revenues, down from $149.8 million in the year-ago quarter. Inventory corrections in Cellular base station markets affected net sales in this segment. However, Qorvo secured new product orders for several large domestic and international ground-based radar systems. The transition from legacy mechanical systems to active electronics scanning systems is driving growth in the defense and aerospace business.In power management, the company continues to boast a strong presence in the consumer electronic sector. Healthy traction in automotive also cushioned the top line. Growing demand for DOCSIS 4.0 hybrid power doublers is supporting growth in the infrastructure business.Revenues from Connectivity and Sensors Group (CSG) were $146.8 million compared with $103.6 million in the year-earlier quarter. The improvement was driven by the growing adoption of Wi-Fi 7 across operator, retail, enterprise and mobile segments. Investment in diverse growth businesses, including an expanding portfolio of automotive solutions and SoCs for ultra-wideband, also supported this segment. Net sales in Advance Cellular Group were $751.4 million, down 11.6% year over year from the prior-year quarter’s $850.1 million due to seasonal dynamics.Other DetailsOn a GAAP basis, gross profit declined to $445.3 million from $489.7 million, with respective margins of 42.6% and 44.4%. Non-GAAP gross margin was 47% compared with 47.6% in the prior-year quarter. Non-GAAP operating income was $212.2 million, down from $279.4 million in the year-ago quarter, as non-GAAP operating expenses increased to $279.8 million from $245.8 million, owing to higher investments in new product development.Cash Flow & LiquidityAs of Sept. 28, 2024, QRVO had $1.1 billion in cash and cash equivalents and $1.55 billion of long-term debt. The company generated $127.8 million in cash from operating activities, with a free cash flow of $94.8 million. During the quarter, Qorvo repurchased $81 million shares at an average price of $110 per share.OutlookQorvo actively invests in diverse businesses to broaden its portfolio and enhance market exposure. Management expects the decline in channel inventory to continue in the upcoming quarters. In addition, the company expects an unfavorable mix due to a shift from the mid toward entry-tier Android 5G smartphones. Consequently, Qorvo is aiming to consolidate factories and reduce operating expenses to achieve its long-term profitability objectives.For third-quarter fiscal 2025, the company approximated revenues of $900 million (+/- $25 million). Non-GAAP gross margin is estimated to be approximately 45%. Non-GAAP earnings per share are likely to be in the range of $1.10-$1.30. The company expects non-GAAP operating expenses to be approximately $265 million in the December quarter.For fiscal 2025, Qorvo anticipates revenues to be slightly down compared to fiscal 2024, owing to two factors affecting the smartphone business.How Have Estimates Been Moving Since Then?It turns out, estimates review have trended downward during the past month.The consensus estimate has shifted -47.24% due to these changes.VGM ScoresAt this time, Qorvo has a subpar Growth Score of D, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.OutlookEstimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Qorvo has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.Free: 5 Stocks to Buy As Infrastructure Spending SoarsTrillions of dollars in Federal funds have been earmarked to repair and upgrade America’s infrastructure. 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