Yahoo Finance Knowles (KN) Revenues Falter Y/Y, Q1 Earnings Beat Estimates
Knowles Corporation KN reported relatively modest first-quarter 2023 results, with the bottom line beating the Zacks Consensus Estimate by a penny. The leading supplier of sophisticated micro-acoustic, audio processing and precision device solutions reported year-over-year lower revenues. The downside was due to demand softness in consumer electronic end markets, excess inventory levels and unfavorable product mix.
Net Income
On a GAAP basis, the company incurred a net loss of $5.2 million or a loss of 6 cents per share against a net income of $18.1 million or 19 cents per share in the prior-year quarter. The loss was primarily caused by a decline in net sales.
Non-GAAP net income was $5.1 million or 5 cents per share compared with $33.6 million or 35 cents per share in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by a penny.
Knowles Corporation Price, Consensus and EPS Surprise
Knowles Corporation price-consensus-eps-surprise-chart | Knowles Corporation Quote
Revenues
In the first quarter, Knowles recorded revenues of $144.3 million, down from $201.4 million reported in the prior-year quarter. The 28.4% year-over-year decline was primarily due to weakness in consumer electronic market, lower shipment in volumes in consumer MEMS mics and MedTech and Specialty Audio and excess customer and channel inventory in all segments.
The Precision Devices segment witnessed a 3.6% top-line contraction year over year. In the March quarter, revenues declined to $53.7 million from $55.7 million in the prior-year quarter. Industrial market is down owing to excess inventory level, which led to net sales decline from this segment. However, year-over-year growth in Electric Vehicle, MedTech and Defense markets partially reversed this trend.
MedTech & Specialty Audio revenues declined 23.5% to $45.5 million from $59.5 million in the year-ago quarter. Lower factory utilization, unfavorable mix and high inventory hampered net sales from this segment.
Consumer MEMS Microphones witnessed a steep year-over-year decline of 47.7% in revenues. In the first quarter, the segment registered net sales of $45.1 million compared with $86.2 million in the prior-year quarter. Higher inventory levels and sluggish demand in the consumer electronic end markets affected the top line.
Other Details
Non-GAAP gross profit declined to $54.4 million from $83.8 million in the year-ago quarter. The downside was primarily due to lower capacity utilization. In the first quarter, non-GAAP gross margin was 37.7%, down 390 basis points from the prior-year quarter’s levels of 41.6%. The company’s operating expenses decreased to $54.8 million compared with $ 62 million reported in the year-ago quarter.
Cash Flow & Liquidity
During the first quarter of 2023, Knowles generated $21.9 million of net cash from operating activities. As of Mar 31, 2023, the company had $52 million in cash and cash equivalents with $45 million of long-term debt.
Outlook
Despite the near-term challenges, management expects strong sequential growth in net sales. Considering the improvement in the channel inventory levels in several end markets, the company expects year-over-year growth in the second half of 2023. For the second quarter, Knowles anticipates revenues in the range of $165-$180 million on a non-GAAP basis. The non-GAAP gross margin is estimated to be 39-41%. EBIT margin is estimated to be in the range of 14-16%. Capital spending is approximated at $5 million. Cash from operations is expected at $5 million (+/-). Non-GAAP earnings per share are projected between 20 cents and 24 cents.
Stocks to Consider
Arista Networks, Inc. ANET, carrying a Zacks Rank #2 (Buy), delivered an earnings surprise of 14.17%, on average, in the trailing four quarters. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Earnings estimates for ANET for the current year stand at $5.78 per share. Arista provides 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.
It continues to benefit from strong momentum and diversification across its top verticals and product lines. The company has a software-driven, data-centric approach to help customers build their cloud architecture and enhance their cloud experience. It is well-poised for growth in data-driven cloud networking business with proactive platforms and predictive operations. Arista has introduced network observability software, DANZ Monitoring Fabric (DMF), on its switching platforms for enterprise-wide traffic visibility and contextual insights.
Meta Platforms Inc. META, sporting a Zacks Rank #1, delivered an earnings surprise of 15.46%, on average, in the trailing four quarters. Meta Platforms is the world’s largest social media platform. The company’s portfolio offering evolved from a single Facebook app to multiple apps like photo and video sharing app Instagram and WhatsApp messaging app owing to acquisitions.
Meta is considered to have pioneered the concept of social networking, which is why it enjoys a first mover’s advantage in this market. However, as developed regions mature, Meta has taken measures to drive penetration in emerging markets of South East Asia, Latin America and Africa.
Splunk Inc. SPLK, sporting a Zacks Rank #1, delivered an earnings surprise of 131.1%, on average, in the trailing four quarters. In the last reported quarter, it pulled off an earnings surprise of 83.78%. Splunk provides software solutions that enable enterprises to gain real-time operational intelligence by harnessing the value of their data. The company's offerings enable users to investigate, monitor, analyze and act on machine data and big data, irrespective of format or source and help in operational decision-making.
Its software has a broad range of applications, including security analytics, business analytics and IT operations. Splunk is benefiting from healthy customer engagement, evident from the consistently high net retention and competitive win rates alongside solid momentum with large orders overall.
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