Why Shares of Amkor Technology Inc. Slumped on Tuesday

By Markets Fool.com

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What: Shares of Amkor Technology slumped on Tuesday after the provider of semiconductor packaging and test services fell short of analyst estimates when it reported its second-quarter earnings. At 1:45 p.m. Tuesday, the stock was down 17%.

So what: Amkor reported quarterly revenue of $737 million, down 4% year-over-year and about $10 million shy of the average analyst estimate. The total number of packaged units declined by 7.3% year-over-year, with a 20% decline in packaged mainstream products, which use wirebond packaging, counteracting a 41% increase in packaged advanced products.

The company reported EPS of $0.04, or $0.08 excluding a charge for early extinguishment of debt. This is down from EPS of $0.21 during the second quarter of 2014, and below the $0.11 that analysts were expecting. Lower revenues and a four-percentage-point decrease in gross margin compared to the same period last year contributed to the earnings decline.

Amkor expects the mobile device market to remain sluggish in the third quarter, and the company is guiding for third-quarter revenue between $700 million and $750 million. Gross margin will also be depressed, in the range of 13%-16%, and the company expects its EPS to be between a loss $0.03 and a gain of $0.06. During the third quarter of 2014, Amkor reported EPS of $0.20 on $813 million of revenue.

Now what: Amkor estimates that more than 50% of its packaged units are for communications devices, including smartphones, tablets, and handheld devices. This makes the company highly dependent on demand for mobile devices, and sluggish demand is causing falling revenue and profits.

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CEO Steve Kelley is optimistic that things will turn around in the fourth quarter, citing the anticipated launch of flagship mobile devices, likely a new iPhone. For the moment, though, weak guidance and the possibility of a net loss in the third quarter are sending investors fleeing.

The article Why Shares of Amkor Technology Inc. Slumped on Tuesday originally appeared on Fool.com.

Timothy Green has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.