Knowles Soars 9.3%: Can This Earnings Surge Sustain Momentum?

Summary
• Knowles (KN) surges 9.27% to $20.39 on robust Q2 results
• Revenue jumps 8% to $146M, EPS up 20% to $0.24
• Q3 guidance hints at $144M–$154M revenue range
• Intraday high hits $20.80, near 52-week peak
Knowles’ shares have ignited a sharp rally following Q2 earnings that surpassed estimates, driven by strong revenue growth and improved cash flow. The stock’s 9.3% surge reflects optimism around Q3 guidance and operational resilience in high-margin MedTech and Defense segments. With a 52-week high of $20.855 in sight, investors are weighing whether this momentum is a breakout or a short-term spike.

Q2 Earnings and Cash Flow Catalysts
Knowles’ 9.3% rally stems from Q2 results that outperformed expectations. Revenue rose 8% to $146 million, with Precision Devices and MedTech & Specialty Audio segments contributing 6% and 10% growth, respectively. Non-GAAP EPS of $0.24 beat by $0.01, while cash from operations hit $36 million—enabling a $30 million share repurchase. Q3 guidance ($144M–$154M revenue) and gross margin expansion (44.3% in Q2) signaled operational strength, driving investor confidence in sustained demand for high-reliability components in medtech and defense.

Options and Technicals for Momentum Traders
• MACD: 0.313 (bullish), Signal Line: 0.274, Histogram: 0.039 (rising)
• RSI: 55.4 (neutral), Bollinger Bands: $17.30–$18.82 (price near upper band)
• 200D MA: $17.61 (price above), 30D MA: $17.80 (price above)
KN’s short-term bullish trend aligns with its 52-week high. Key resistance at $20.80 (52W high) and support at $19.28 (intraday low) define near-term action. The 9.3% move suggests a continuation setup, with options offering leverage on potential breakouts.

Top Options:
• KN20251219C20 (Call, $20 strike, 2025-12-19):
- IV: 18.25% (moderate), Leverage: 15.74%, Delta: 0.633 (moderate), Theta: -0.0065 (modest time decay), Gamma: 0.1596 (high sensitivity)
- Payoff: At 5% upside ($21.41), profit = $1.41/share. This call offers high gamma for price sensitivity and reasonable leverage.
• KN20260320C22.5 (Call, $22.5 strike, 2026-03-20):
- IV: 36.15% (high), Leverage: 11.60%, Delta: 0.458 (moderate), Theta: -0.0063 (modest decay), Gamma: 0.0668 (moderate)
- Payoff: At 5% upside ($21.41), profit = $-1.09/share (out of the money). While IV is high, the longer expiration reduces time pressure.
Trade Setup: Aggressive bulls may target the $20.80–$20.85 range with KN20251219C20. A break above $20.80 could validate a continuation pattern, while a close below $19.28 may trigger a pullback.

Backtest Knowles Stock Performance
The backtest of KN's performance after a 9% intraday surge shows mixed results. While the stock experienced a positive surge, the returns over various time frames were relatively modest, and the win rates were not exceptionally high. This suggests that while the intraday increase was significant, it may not have led to sustained long-term gains.

Breakout or Blip? Watch $20.80
Knowles’ 9.3% surge reflects strong Q2 execution and Q3 optimism, but sustainability depends on breaking above $20.80 (52W high) to confirm a bullish trend. Technicals suggest a short-term ranging pattern with momentum favoring the upper band. Investors should monitor the Precision Devices segment’s performance and gross margin guidance for Q3. Medtronic (MDT), the sector leader, is flat at 0.005%—indicating KN’s move is stock-specific. A close above $20.80 could unlock multi-month upside, while a retest of $19.28 may present a buying opportunity. Action: Target a breakout above $20.80 with a stop below $19.28 to capture momentum or re-entry potential.