Yahoo Finance Knowles (KN) Revenues Down Y/Y, Q4 Earnings Beat Estimates
Knowles Corporation KN reported mixed fourth-quarter 2022 results, with the top line missing the Zacks Consensus Estimate and the bottom line beating the same by a penny. The leading supplier of sophisticated micro-acoustic, audio processing and precision device solutions reported year-over-year lower revenues due to sluggish demand and inventory adjustments in the consumer electronics market. Nevertheless, robust demand in defense, medtech, EV and industrial markets partially cushioned the bottom-line performance.
Net Income
On a GAAP basis, the company incurred a net loss of $208 million or a loss of $2.28 per share against a net income of $92.6 million or 98 cents per share in the prior-year quarter. Significantly higher impairment charges and a poor top-line performance negatively impacted fourth-quarter earnings.
Non-GAAP net income was $30.7 million or 33 cents per share compared with $46 million or 48 cents per share in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by a penny.
In 2022, the company incurred a loss of $430.1 million or a loss of $4.69 per share against a net income of $150.4 million or $1.59 per share in the previous year. It’s non-GAAP net earnings stood at $119.3 million or $1.26 per share compared with $146.9 million or earnings of $1.53 per share in 2021.
Knowles Corporation Price, Consensus and EPS Surprise
Knowles Corporation price-consensus-eps-surprise-chart | Knowles Corporation Quote
Revenues
In the fourth quarter, Knowles’ revenues declined to $197.1 million from $234.3 million in the previous year’s quarter. Top line missed the Zacks Consensus Estimate of $210 million. The 16% year-over-year reduction in the top line was induced by poor performance in the Consumer MEMS Microphones and MedTech & Specialty Audio segments. This downward trend was partially reversed by the Precision Devices segment’s robust performance.
In 2022, revenues declined 12% to $764.7 million compared with $868.1 million in 2021.
The Precision Devices segment registered a 9.3% top-line expansion year over year. In the December quarter, revenues increased to $63.3 million from $57.9 million in the prior-year quarter. The healthy demand in defense, medtech, EV and industrial markets contributed to the top line in this segment.
MedTech & Specialty Audio revenues declined by 13.4% to $61.8 million from $71.4 million in the year-ago quarter. Waning end market demand and customer inventory adjustments facilitated the fall of revenues from this segment.
Consumer MEMS Microphones witnessed a sharp decline of 31.4% in revenue year over year. In the fourth quarter, the company registered revenues of $72 million compared with $105 million in the previous-year quarter. Higher inventory levels, demand softness in the consumer electronics market and the COVID situation in China dented the top line in this segment.
Other Details
In the fourth quarter, non GAAP gross margin was 40.4%, down 290 basis points from the prior-year quarter’s levels. Non-GAAP gross profit declined to $79.6 million from $101.4 million in the year-ago quarter. Underutilization of factory capacity and an unfavorable product mix in the Consumer MEMS Microphones segment had a dismal impact on gross profit margin. Favorable product mix and FX benefits in MedTech & Specialty Audio cushioned non-GAAP gross profit margin. The company’s operating expenses totaled $282.2 million, significantly higher than the prior-year quarter’s figure of $60.3 million. Staggering impairment charges of $231.1 million pushed up the operating expenditures in the December quarter.
Cash Flow & Liquidity
During the full year of 2022, Knowles generated $86.3 million from operating activities compared with $182.1 million in 2021. As of Dec 31, 2022, the company had $48.2 million in cash and cash equivalents with $45 million of long-term debt compared with cash and cash equivalents of $68.9 million with $70 million long-term debt in 2021.
Outlook
For the first quarter of 2023, Knowles expects revenues in the range of $140-$155 million. The consumer MEMS mic, MedTech, and specialty audio categories' revenues would likely be impacted by weak demand and inventory adjustments. Growth in Precision Devices is likely to support the top-line performance. Management estimates the non-GAAP gross margin to be 32-35%, which is 8% lower than the prior-year period’s levels. This is due to the underutilization of factory capacity and an unfavorable mix in the company’s Consumer MEMS mic Medtech and Specialty audio segments. EBIT margin is estimated in the range of 2-6%, while non-GAAP earnings per share are projected to be between 1 cent and 7 cents. Tax rate is expected to be between 16% and 18% in the first quarter of 2023.
Zacks Rank & Stocks to Consider
Knowles currently carries a Zacks Rank #3 (Hold). You can the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Arista Networks, Inc. ANET, carrying a Zacks Rank #2 (Buy), delivered an earnings surprise of 12.7%, on average, in the trailing four quarters. Earnings estimates for ANET stand at $4.38 per share.
Arista is engaged in providing cloud networking solutions for data centers and cloud computing environments. The company offers 10/25/40/50/100 Gigabit Ethernet switches and routers optimized for next-generation data center networks.
Viavi Solutions Inc. VIAV, carrying a Zacks Rank #2, delivered an earnings surprise of 9.10%, on average, in the trailing four quarters. In the last reported quarter it delivered an earnings surprise of 27.27%.
Viavi Solutions Inc. is a leading provider of network test, monitoring and service enablement solutions to diverse sectors across the globe. The product portfolio of the company offers end-to-end network visibility and analytics that help build, test, certify, maintain, and optimize complex physical and virtual networks.
Jabil Inc. JBL, sporting a Zacks Rank #1, delivered an earnings surprise of 8.7%, on average, in the trailing four quarters. Earnings estimates for JBL for the current year have remained unchanged in the past 30 days at $8.37 per share.
Jabil is one of the largest global suppliers of electronic manufacturing services. The company offers electronics design, production, product management and after-market services to customers catering to aerospace, automotive, computing, consumer, defense, industrial, instrumentation, medical, networking, peripherals, storage and telecommunications industries.
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