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Amkor Technologies Earnings Preview

Amkor Technologies Earnings Preview
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Amkor Technology, Inc. (AMKR), a provider of outsourced semiconductor assembly and test services, is all set to announce its quarterly earnings for second quarter of fiscal’14 (2QFY14; ended June 30) after markets closed today.

The company expects quarterly revenues of $735-785 million, and earnings of $0.08-0.18 per share. Analysts are expecting revenues to be almost in line with the mid-point of the company’s guidance, at $761 million. Earnings are expected to be 15.4% higher compared to the company’s guidance midpoint of $0.15 per share for 2QFY14.

Although the company does not provide yearly guidance, analysts’ estimates for the full year are $3.13 billion for revenues and 68 cents for earnings per share (EPS). Amkor outperformed analysts’ estimates in 1QFY14 by reporting revenues of $696 million and EPS of nine cents. It has beaten analysts’ estimates of revenues and earnings for the last three quarters.

The company is expected to do the same this quarter since Amkor’s customer forecast has improved, and its recent growth plans are covering rapid ground. Its growth plans include the acquisition of Toshiba’s Malaysian facility, specially designed marketing campaigns for China and Taiwan, and an increased expenditure on R&D activity for the 20-nanometer production segment.

The company has experienced an increased demand in the wafer segment as many customers are moving toward wafer level packaging; it provides a cheap solution for thin and light-weight smartphones and tablets. It is also expecting to see similar demand patterns in the advance packaging segment due to changing customer needs. Moreover, Amkor has ambitious plans for its mobile devices segment in 3QFY14, as many devices with Amkor hardware will launch in the market.

The company’s strong performance is already priced in, as the stock has gained more than 60% year-to-date (YTD). However, the stock was at 3.97% to close at $9.79 after the overall Technology SPDR ETF (XLK) dropped 0.13% on Friday.

Over the past five years, the company has traded at a discount of 39% on average to the S&P 500 Semiconductor Equipment Industry Index. Currently, the shares are trading at a forward P/E of 12.41x, which is a discount of 17.2% to the industry. After the announcement of quarterly earnings results, the stock gained 1.7% a day later, and 2.9% in the three days following the release, in the last eight quarters.

Of six analysts covering the stock, three have rated it a Buy and three have rated it a Hold. The mean target price of the stock is recorded at $9.33, 4.79% lower than the current stock price.

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