Why Is Cirrus Logic (CRUS) Down 2.1% Since Last Earnings Report?

A month has gone by since the last earnings report for Cirrus Logic (CRUS). Shares have lost about 2.1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Cirrus Logic due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Cirrus Logic’s Q2 Earnings & Revenues Beat Estimates

Cirrus Logic delivered better-than-anticipated second-quarter fiscal 2022 results, wherein both the top and bottom lines not only surpassed the respective Zacks Consensus Estimate but also improved year over year.

The company reported adjusted earnings of $1.82 per share beating the Zacks Consensus Estimate of $1.63 per share. The bottom line improved 44.4% from the prior-year quarter’s reported figure of $1.26.

Total revenues of $465.9 million surpassed the Zacks Consensus Estimate of $450.7 million and increased 34.1%, year over year.

Top-Line Details

During the second quarter, the top line was mainly driven by higher Android-based smartphone volumes, increased high-performance mixed-signal contents and higher audio component shipment for laptops, partially offset by returns from wired headset codecs.

The company noted revenue contribution from the acquisition of Lion Semiconductors in this quarter. Strong momentum in audio and haptic solutions beyond smartphones acted as a tailwind for the top line.

Along with increasing investments in R&D, Cirrus Logic is accelerating sales momentum and executing strategic initiatives, which will help in achieving sustainable growth over the next year. As part of its strategic initiatives, the company has been consistently focusing on strengthening presence among its Android customers and ramping up shipments for the leading laptop original equipment manufacturers (“OEMs”).

The Texas-based company rearranged its reportable segments and created a separate category during fourth-quarter fiscal 2021, namely High-Performance Mixed-Signal and Audio.

Cirrus Logic’s High-Performance Mixed-Signal segment includes a few of its non-audio products and accounted for 35.4% of total revenues for the fiscal second quarter. Revenues from the same division surged a whopping 144.9% year over year to $165.1 million on solid strong demand for its camera controllers, haptics & sensing, and recently acquired fast-charging solutions. During the first six months of fiscal 2022, the segment contributed 30% of total revenues.

The Audio segment sales increased 7.5% to $300.8 million and made up 64.6% of the total revenues.

Margins

Non-GAAP gross profit of $239.2 million climbed 32.6% on a year-over-year basis. Non-GAAP gross margin, however, contracted 60 basis points (bps) to 51.3%.

Cirrus Logic’s non-GAAP operating expenses jumped 17.1% year over year to $114.5 million.

Non-GAAP operating income of $124.6 million increased 50.8% year over year. Moreover, non-GAAP operating margin expanded 300 bps to 26.8%.

Balance Sheet and Cash Flow

The company exited the fiscal 2022 second quarter with cash and marketable securities of $394.9 million compared with the $445.6 million seen at the end of the previous quarter.

Accounts receivables were $281 million compared with $136.5 million recorded in the prior quarter. It did not report any long-term debt as of Sep 25, 2021.

Outlook

For third-quarter fiscal 2022, the company projects revenues between $490 million and $530 million. At the mid-point, the guidance suggests growth of approximately 5% year over year.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month.

VGM Scores

At this time, Cirrus Logic has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Cirrus Logic has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.

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