This week earnings season will be in full force: According to Zacks Earnings Calendar, nearly 450 companies are set to report this week alone. Like it or not, the mood the equity market and the S&P 500 (NYSEARCA:SPY) will very much be driven off the quality of these results and more importantly the tone of management teams. In my opinion, listening to the conference call or reading through the transcripts are where you get an excellent feel for how confident a management team is going forward. Seeking Alpha offers a great way to get a hold of these transcripts and I encourage anyone who owns stocks to do this. I thought I'd provide an example of a company that I currently own for myself and the clients of Mott Capital Management, LLC in The Thematic Growth Portfolio.
Last week, as many may already know Skyworks Solutions (NASDAQ:SWKS) report EPS of $1.61 and revenue $914.3 million, according to Seeking Alpha these numbers beat estimates by $0.03 and $11.62 million. The company also reported fiscal 2Q guidance for EPS of $1.40 and Revenue of $840 million, both ahead of estimates of approximately $818 million in revenue and estimates of EPS of $1.39. Finally, the company also announced a share repurchase agreement of $500 million.
These results in itself were enough to get the stock charging ahead as shares surged in the after hours. However, in my opinion, it was the Conference Call to follow, that sent the shares soaring by over 12% the following day. The first half of any conference call is scripted, and it is the Q&A portion to me that always holds the most weight. That is what I will focus on here. The most meaningful exchange happened between the CEO of SWKS and Liam Griffin and Craig Ellis of B. Riley. This what was said:
Thanks for taking the question guys and nice job on the execution. Liam, I wanted to ask to ask an intermediate to long-term question, it's nice to see the business back to 8% year-on-year growth in the fiscal second quarter. So, the question is as you look at the business, what's your view on the potential for this return to year-on-year growth, could be sustainable year-on-year growth and what do you think the right level of longer-term growth is for Skyworks given the portfolio mix that you have and the investments that you're making in the business?
Yes, no, I appreciate that and you're right. I think we weathered a bit of storm here in '16 and most of the clouds there have abated and it's not just market shares. We're gaining share, we're creating new content. We're expanding in IOT and in broad markets and its meaningful and its sustainable.
We're confident that the second half for us should be a double-digit growth rate year-over-year. We think we'll have strength going into the next fiscal year as well just given our outlook and our design wins that we've secured recently. So, we feel good about it. Again, there is room to go on the margin line. We're going to work that. The demand side let's say, looks very good and more diversified I should add."
Summarized, the problems of 2016 have passed. SWKS is not only keeping their current market share, but it is also taking market share - and it is significant, and it is going to continue. The second paragraph is almost equally as important. Double digit growth for the second half of 2017 and the expectation of that rate continuing into 2018. The demand they are seeing is robust and diversified.
When I read this, it signals a very confident management team; it tells me something all of those numbers the company reported can't tell me. A magnificent example as to why reading or listening to conference calls are one of the most important things an investor can do. If you want to know why SWKS went up by 12% on Friday, it is because of the confidence the management team exuded during its conference call.
Other conference calls and earnings I will be watching this week, because they are in the Thematic Growth Portfolio are:
Verizon (NYSE:VZ) on January 24th Pre-Market: Any updates on 5G, acquisition plans, any thoughts of getting into content.
Celgene (NASDAQ:CELG) on January 26th Pre-Market: Celgene already provided revenue and guidance at the JPM Healthcare conference. I will be paying attention to updates on the pipelines and any talk regarding M&A.
Diageo (NYSE:DEO) January 26th Pre-Market - impact Of the weakening pound, commentary surrounding the emerging markets and consumer strength in developed market. Companies like Diageo can give an individual the true pulse of the global economy. Companies like Diageo and Unilever (NYSE:UL) which sell the most basic of consumer staples that in my opinion tend to see trends well in advance of other parts of the market. You can read the MCM 3Q'15 letter as an example how we use these two companies to gauge the global economy.
Starbucks (NASDAQ:SBUX) on January 26th after-close: I will be paying attention to same-store comps performance in China.
This week in our members only area of Reading The Market, we will focus on the sector most likely to benefit from a corporate tax cut. We offer a two-week free trial so I encourage you to try it out.
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Have a great week.
Disclosure: I am/we are long CELG, DEO, VZ, SWKS, UL, SBUX.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: Mott Capital Management, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request the advisor will provide a list of all recommendation made during the past twelve months. Past performance is not indicative of future performance.