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TriQuint Semiconductor (TQNT): Make-or-Break Day Coming for This Apple Inc. (AAPL) Supplier

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TriQuint Semiconductor (NASDAQ:TQNT)I’ve been bullish on chipmaker TriQuint Semiconductor (NASDAQ:TQNT) for what seems like ages, but the stock has disappointed me more often than not. However, surprisingly, the company’s shares are up more than 46% this year. But, most of that appreciation has happened in the last three months after TriQuint offered a glimmer of hope to investors and stated that it will put a full stop to its terrible habit of posting losses and turn in a profit in the current fiscal year.

This is the reason TriQuint Semiconductor (NASDAQ:TQNT) investors have been having a great time this year, but the company’s resolve will be put to test when it releases its second-quarter results on July 24. The company will need to turn in a great performance and handsomely beat analyst estimates if it is to achieve its target of being profitable this year.

Let’s check what analysts expect from TriQuint and if the company can actually deliver on its promise of returning to profitability in the second half of the year.

On revenue

Analysts, according to Yahoo! Finance, expect TriQuint Semiconductor (NASDAQ:TQNT) to post revenue of $188 million in the quarter, which would translate into a gain of around 5% from the year-ago period. The company shouldn’t have much difficulty meeting these estimates, as it had itself guided for revenue between $185 million and $190 million when it released its first-quarter results.

The analyst estimate has been lowered from the original $192.4 million estimate, which means that the company had faltered on outlook last time. However, it should also be kept in mind that TriQuint had closed the first quarter with a book-to-bill ratio of above 1, which means that the company had witnessed orders for its products. So it shouldn’t have any difficulty in at least meeting the estimates.

On earnings

TriQuint has a pretty good history as far as comparisons with earnings estimates are concerned. It has beaten on this front in three of the last four quarters, but some of them have been a result of a lower outlook. However, the first quarter was a really bad one as the company posted a loss of $0.17 a share while analysts expected a loss of $0.13. They once again expect TriQuint Semiconductor (NASDAQ:TQNT) to be in the red at $0.11 a share, which is worse than last year’s $0.09 per share loss.

But, like revenue, the company should meet this estimate as well, since it had guided for a loss between $0.12 and $0.10 per share three months back, and the mid-point of this estimate is in line with expectations. But then, this would be a massive improvement on a sequential basis, and the company should at least meet the target since it is in its own comfort zone.

A look at the gross margin expectation also indicates that an improvement in earnings is in the cards. TriQuint’s gross margin in the first quarter was 22.8%, but the same was expected to between 27% and 29% in the second quarter. So, if TriQuint Semiconductor (NASDAQ:TQNT) did improve its gross margin, it should turn in a better earnings performance as well.

It all boils down to the outlook

If TriQuint manages to meet the earnings estimate, its total loss for the two quarters this year would be $0.28. This means that the company will have to post a profit of at least $0.29 in the remaining two quarters, and the turnaround needs to begin with the outlook for the third quarter. So, what might be the tailwinds that the company is counting on to turn profitable?

Well, the first would undoubtedly be its Apple Inc. (NASDAQ:AAPL) account. Apple, via Foxconn, accounted for one-fourth of the company’s top line in the first quarter and was a major reason behind TriQuint Semiconductor (NASDAQ:TQNT)’s faltering revenue performance as it slashed orders for iPhone parts. However, a decent book-to-bill ratio in the previous quarter suggests that orders are again starting to flow in.

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