This is the reason TriQuint Semiconductor (NASDAQ:TQNT) investors have been having a great time this year, but the company’s resolve will be put to test when it releases its second-quarter results on July 24. The company will need to turn in a great performance and handsomely beat analyst estimates if it is to achieve its target of being profitable this year.
Let’s check what analysts expect from TriQuint and if the company can actually deliver on its promise of returning to profitability in the second half of the year.
On revenue
Analysts, according to Yahoo! Finance, expect TriQuint Semiconductor (NASDAQ:TQNT) to post revenue of $188 million in the quarter, which would translate into a gain of around 5% from the year-ago period. The company shouldn’t have much difficulty meeting these estimates, as it had itself guided for revenue between $185 million and $190 million when it released its first-quarter results.
The analyst estimate has been lowered from the original $192.4 million estimate, which means that the company had faltered on outlook last time. However, it should also be kept in mind that TriQuint had closed the first quarter with a book-to-bill ratio of above 1, which means that the company had witnessed orders for its products. So it shouldn’t have any difficulty in at least meeting the estimates.
On earnings
TriQuint has a pretty good history as far as comparisons with earnings estimates are concerned. It has beaten on this front in three of the last four quarters, but some of them have been a result of a lower outlook. However, the first quarter was a really bad one as the company posted a loss of $0.17 a share while analysts expected a loss of $0.13. They once again expect TriQuint Semiconductor (NASDAQ:TQNT) to be in the red at $0.11 a share, which is worse than last year’s $0.09 per share loss.
But, like revenue, the company should meet this estimate as well, since it had guided for a loss between $0.12 and $0.10 per share three months back, and the mid-point of this estimate is in line with expectations. But then, this would be a massive improvement on a sequential basis, and the company should at least meet the target since it is in its own comfort zone.
A look at the gross margin expectation also indicates that an improvement in earnings is in the cards. TriQuint’s gross margin in the first quarter was 22.8%, but the same was expected to between 27% and 29% in the second quarter. So, if TriQuint Semiconductor (NASDAQ:TQNT) did improve its gross margin, it should turn in a better earnings performance as well.
It all boils down to the outlook
If TriQuint manages to meet the earnings estimate, its total loss for the two quarters this year would be $0.28. This means that the company will have to post a profit of at least $0.29 in the remaining two quarters, and the turnaround needs to begin with the outlook for the third quarter. So, what might be the tailwinds that the company is counting on to turn profitable?
Well, the first would undoubtedly be its Apple Inc. (NASDAQ:AAPL) account. Apple, via Foxconn, accounted for one-fourth of the company’s top line in the first quarter and was a major reason behind TriQuint Semiconductor (NASDAQ:TQNT)’s faltering revenue performance as it slashed orders for iPhone parts. However, a decent book-to-bill ratio in the previous quarter suggests that orders are again starting to flow in.
Moreover, All Things D reports that iPhone 5S production will begin this month, which means that the possibility of a strong outlook from TriQuint is indeed there as Apple Inc. (NASDAQ:AAPL) ramps up production and orders components. In addition, the same report also suggests that Apple Inc. (NASDAQ:AAPL) has already begun production of a low-cost iPhone, which should again help TriQuint gain if it has managed to land a spot in the device.
As All Things D points out, Apple Inc. (NASDAQ:AAPL)’s budget devices, such as the iPad mini and the iPod nano have done well despite their pricing when compared to competing devices, and a mid-tier iPhone might also sell in good numbers, and might be one of the reasons TriQuint Semiconductor (NASDAQ:TQNT) is confident of a return to profitability this year.
In addition, TriQuint also counts Samsung and Research In Motion Ltd (NASDAQ:BBRY) as clients as well. However, Samsung’s flagship has already been on the market for some time, and so, it might not play a big role in providing a boost to TriQuint’s outlook.
But Samsung is now trying to flood the market with more devices as it looks to capture more market, especially in the U.S. The company already has a downsized version of its flagship in the form of the S4 mini, and might introduce multiple models of its important devices in the future as well as reports suggest. TriQuint Semiconductor (NASDAQ:TQNT) had provided wireless chips for the S4, and if Samsung indeed goes for multiple models at various price points, TriQuint should see an increase in its addressable market.
TriQuint Semiconductor (NASDAQ:TQNT) is also counting on Chinese smartphone growth and the company said that it has landed a few design wins at Chinese manufacturers. The market in China is booming and it won’t be surprising if this is another reason behind a positive outlook.
The company is looking to benefit from data growth around the world as its chips enable connectivity and also enjoys diversification through its exposure to the networking infrastructure (where it now counts the likes of Ericsson, Huawei, and ZTE as customers) and defense markets, apart from mobile.
The bottom line
Investors have enjoyed solid returns from TriQuint in 2013, but they will be waiting with bated breath to see if the company is really in a position to fulfill its promise. What if TriQuint falters once again? Will it be a good buy on a pullback? Or what if it indeed delivers a solid outlook? Will it be a good buy even then considering the solid appreciation it has enjoyed this year?
Harsh Chauhan has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple Inc. (NASDAQ:AAPL) and TriQuint Semiconductor (NASDAQ:TQNT).
The article Make-or-Break Day Coming for This Apple Supplier originally appeared on Fool.com.
Harsh is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
