Qorvo: Zacks’ Bull of the Day Play

Qorvo (QRVOSnapshot Report) is the combination of RF Micro Devices and TriQuint Semi, and as a significant player in the microchip sector, this stock has seen a substantial gain of late. Part of this is due to the strength of Apple, but electronic devices in general are proliferating and this means the whole pie for this space is growing and QRVO is going after a big slice.Strong Industry and Zacks Rank

Being the Bull of the Day is all about why a stock has reached the highly desired position of a Zacks Rank #1 (Strong Buy). This tends to happen when analysts from firms like Morgan Stanely, Merrill Lynch, William Blair and others move their earnings estimates higher. Those moves have an impact the valuations of stocks, so finding the best estimate revisions is what the Zacks Rank does for you, and the Bull of the Day help highlight one of those stocks.

Qorvo (QRVOSnapshot Report) not only has the strong Zack Rank, but the Industry that QRVO is currently ranked 4/265 making it the top 2%. In writing a Bull of the Day (and “Rank Buys” before that) over the last few years, I have rarely written on a stock that is a Zacks Rank #1 (Strong Buy) and one of the top four industries.

Description

Qorvo provides technologies and radio frequency solutions for mobile, infrastructure, and aerospace/defense. The company’s product line includes amplifiers, control products, discrete transistors and ICs, filters and duplexers, frequency converters, integrated modules, optical components, oscillators, passives, and switches. Qorvo, Inc. was founded in 1991 and is headquartered in Greensboro, North Carolina.

Earnings History

There has only been one earnings report as a combined company, so you are not going to be able to get a good read on this company from this perspective. The Company reported earnings of $1.42 on January 28 of this year when the Zacks Consensus Estimate was calling for $1.06. This was a substantial beat that translated into a 34% positive earnings surprise.

The conference call did not really satiate investors. The company only discussed one half of the entities performance as the two company’s became one at the close of trading on 12/31/14. The next conference call will be one that investors can begin to get a more of a full picture on the company.

Earnings Estimates

Another issues with the merger is that the prior earning revisions for RFMD and TQNT are out the window. We only have a few months of numbers for QRVO, but in that short amount of time we have already seen the Zacks Consensus Estimate $3.30 to $3.32 for 2015.

The 2016 Zacks Consensus Estimate has held steady at $4.60, where is started the year. The implied earnings growth rate is currently 38.5%.

Valuation

The Zacks Research System, where I get the majority of my data from, only has data on two of the most commonly followed metrics. The forward PE for QRVO is showing 24.1x and that is just a little above the 20.3x industry average. The other metric is the price to book multiple of 13x and that is well above the 3.7x industry average. I would advise investors to not rely on that number at this time, and wait for the reported results from the combined company before making a judgement call based on something like the price to book multiple.

Next Earnings

The company is expected to report again at the end of April. Wall Street is looking for revenue of $621M and EPS of $0.86.

Chart

Normally I show the price and consensus chart here, but since there isn’t much information on that chart I am just showing the 3 month chart.

Follow Brian Bolan on twitter at @BBolan1

Brian Bolan is a Stock Strategist for Zacks.com. He is the Editor in charge of the Zacks Home Run Investor service, a Buy and Hold service where he recommends the stocks in the portfolio.

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