Himax Technologies (HIMX) Earnings Review

Himax Technologies (NASDAQ: HIMX) is doing all the right things for its shareholders. IT is returning profits by paying out a dividend and buying back shares. The next iteration of growth is around the corner as customers demand more components needed for 3D sensors and augmented reality.

In Q3, Himax reported a 9.6% drop in revenue and a GAAP net earnings drop of 72.9%. On a non-GAAP basis, profits dropped 57.9%. Management is leading the company with these negative earnings numbers because it is pivoting the business. It is transitioning out of old products and shifting production of WLO (wafer-level optics). Previously, Himax TDDI (in-cell single-chip touch and display driver integrated solution). This production started in April 2016. Himax started shipping TDDI solutions in Q3 and will ramp up production in Q4.

Guidance

In the current fourth-quarter, Himax forecast revenue falling again by 4 – 10%. It will earn $0.13 - $0.15 a share (GAAP). Fundamentally, Himax’s WLO, in partnership with Qualcomm (NASDAQ: QCOM), is a key component for 3D sensing. Not only will smartphones have this technology, AR/VR, AI, automotive, drones, and other markets will need WLO.

Takeaway

Expect volatility in HIMX stock as investors digest the light forecast against the earnings potential in 2018.