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Cypress Semiconductor (CY) Q3 Earnings Miss Estimates
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Cypress Semiconductor Corporation reported adjusted third-quarter 2016 earnings of 7 cents per share, missing the Zacks Consensus Estimate of 8 cents. Adjusted earnings exclude one-time items but include stock-based compensation expense.
During the quarter, design win momentum and market share gains continued. The acquisition of Broadcom's Wireless Internet of Things (IoT) business that Cypress closed in early July, contributed $62.6 million to its revenues. Last quarter, the company recognized $0.4 million of synergies from this acquisition.
Cypress also recognized $44 million of synergies associated with the Spansion merger and expects $180 million of synergy by the end of this year. The integration remains well on track and Cypress is witnessing new opportunities at top-tier customers, particularly in the automotive and industrial markets. These markets now account for a majority of the company’s sales, bringing in more stable revenues and margins.
However, a weak and uncertain macro environment, limited visibility and intensifying competition are nagging concerns.
Cypress reported non-GAAP revenues of $530.1 million, up 16.2% sequentially. Revenues exceeded management’s guided range of $510.0–$514.0 million and were above the Zacks Consensus Estimate of $518 million.
Revenues by Business Units
Cypress reports revenues under the following divisions: Programmable Systems Division (PSD), Memory Products Division (MPD), Data Communication Division (DCD) and Emerging Technology Division (ETD).
Revenues from the PSD segment increased 8% sequentially to $182.3 million, driven by strong growth in the automotive, microcontroller and PSoC solutions. Notably, the company’s automotive business grew almost 25% year over year.
The MPD segment generated revenues of $239.6 million, down 2% sequentially due to a decrease in NOR revenues and timing of licensing revenues.
Revenues from DCD improved a massive 248% sequentially to $88.7 million. The increase was driven by solid performance in the IoT business and growth in USB Type-C. The company continues to see strong design win momentum in the USB Type-C product.
Revenues from ETD were $19.4 million, down 2% sequentially.
Operating Results
Pro-forma gross margin was 38.9%, up 289 basis points (bps) sequentially. The increase was mainly because of increased factory utilization to 56% upon completion of lean inventory initiatives.
Operating expenses (research & development and selling, general & administrative) of $187.6 million increased 22.9% sequentially. As a percentage of sales, research and development expenses increased, while selling, general and administrative expense decreased.
GAAP net income was $9.41 million or 3 cents per share versus ($519.27) million or loss per share of $1.65 in the previous quarter. Excluding special items but including stock-based compensation expense, non-GAAP earnings per share came in at 7 cents compared with 8 cents in the previous quarter.
Balance Sheet
Cypress exited the quarter with cash, cash equivalents and short-term investments of approximately $847.4 million compared with $189.3 million last quarter. Trade receivables were $349.8 million, up from $325.1 million in the prior quarter. Net inventory was $247.7 million, up from $220.9 million in the prior quarter.
During the quarter, Cypress’ cash flow from operations was roughly $105.1 million and capex was $19.7 million. The company also paid quarterly dividend worth $35.2 million.
Guidance
Management expects fourth quarter 2016 revenues in the range of $510.0–$540.0 million. The Zacks Consensus Estimate is pegged at $517.3 million.
Consolidated gross margin is expected to be roughly 40.0%, depending on utilization, product and customer mix. Operating expenses are likely to be within $141.5–$144.5 million.
Earnings per share are expected in the range of 12 cents to 16 cents. The Zacks Consensus Estimate is pegged at 6 cents for the fourth quarter.
Zacks Rank and Stocks to Consider
Currently, Cypress Semiconductor has a Zacks Rank #2 (Buy). Others stock worth considering in the wider technology sector include Electronics for Imaging, Inc. , Logitech International SA (LOGI - Free Report) and Stratasys Ltd. (SSYS - Free Report) , each carrying a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
For the current year, the consensus estimate for Electronics for Imaginghas gone up by 23.8% in the past 30 days. The same for Logitech and Stratasys has gone up by 4.4% and 27.8% respectively.
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Cypress Semiconductor (CY) Q3 Earnings Miss Estimates
Cypress Semiconductor Corporation reported adjusted third-quarter 2016 earnings of 7 cents per share, missing the Zacks Consensus Estimate of 8 cents. Adjusted earnings exclude one-time items but include stock-based compensation expense.
During the quarter, design win momentum and market share gains continued. The acquisition of Broadcom's Wireless Internet of Things (IoT) business that Cypress closed in early July, contributed $62.6 million to its revenues. Last quarter, the company recognized $0.4 million of synergies from this acquisition.
Cypress also recognized $44 million of synergies associated with the Spansion merger and expects $180 million of synergy by the end of this year. The integration remains well on track and Cypress is witnessing new opportunities at top-tier customers, particularly in the automotive and industrial markets. These markets now account for a majority of the company’s sales, bringing in more stable revenues and margins.
However, a weak and uncertain macro environment, limited visibility and intensifying competition are nagging concerns.
CYPRESS SEMICON Price, Consensus and EPS Surprise
CYPRESS SEMICON Price, Consensus and EPS Surprise | CYPRESS SEMICON Quote
The numbers in detail:-
Revenues
Cypress reported non-GAAP revenues of $530.1 million, up 16.2% sequentially. Revenues exceeded management’s guided range of $510.0–$514.0 million and were above the Zacks Consensus Estimate of $518 million.
Revenues by Business Units
Cypress reports revenues under the following divisions: Programmable Systems Division (PSD), Memory Products Division (MPD), Data Communication Division (DCD) and Emerging Technology Division (ETD).
Revenues from the PSD segment increased 8% sequentially to $182.3 million, driven by strong growth in the automotive, microcontroller and PSoC solutions. Notably, the company’s automotive business grew almost 25% year over year.
The MPD segment generated revenues of $239.6 million, down 2% sequentially due to a decrease in NOR revenues and timing of licensing revenues.
Revenues from DCD improved a massive 248% sequentially to $88.7 million. The increase was driven by solid performance in the IoT business and growth in USB Type-C. The company continues to see strong design win momentum in the USB Type-C product.
Revenues from ETD were $19.4 million, down 2% sequentially.
Operating Results
Pro-forma gross margin was 38.9%, up 289 basis points (bps) sequentially. The increase was mainly because of increased factory utilization to 56% upon completion of lean inventory initiatives.
Operating expenses (research & development and selling, general & administrative) of $187.6 million increased 22.9% sequentially. As a percentage of sales, research and development expenses increased, while selling, general and administrative expense decreased.
GAAP net income was $9.41 million or 3 cents per share versus ($519.27) million or loss per share of $1.65 in the previous quarter. Excluding special items but including stock-based compensation expense, non-GAAP earnings per share came in at 7 cents compared with 8 cents in the previous quarter.
Balance Sheet
Cypress exited the quarter with cash, cash equivalents and short-term investments of approximately $847.4 million compared with $189.3 million last quarter. Trade receivables were $349.8 million, up from $325.1 million in the prior quarter. Net inventory was $247.7 million, up from $220.9 million in the prior quarter.
During the quarter, Cypress’ cash flow from operations was roughly $105.1 million and capex was $19.7 million. The company also paid quarterly dividend worth $35.2 million.
Guidance
Management expects fourth quarter 2016 revenues in the range of $510.0–$540.0 million. The Zacks Consensus Estimate is pegged at $517.3 million.
Consolidated gross margin is expected to be roughly 40.0%, depending on utilization, product and customer mix. Operating expenses are likely to be within $141.5–$144.5 million.
Earnings per share are expected in the range of 12 cents to 16 cents. The Zacks Consensus Estimate is pegged at 6 cents for the fourth quarter.
Zacks Rank and Stocks to Consider
Currently, Cypress Semiconductor has a Zacks Rank #2 (Buy). Others stock worth considering in the wider technology sector include Electronics for Imaging, Inc. , Logitech International SA (LOGI - Free Report) and Stratasys Ltd. (SSYS - Free Report) , each carrying a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
For the current year, the consensus estimate for Electronics for Imaginghas gone up by 23.8% in the past 30 days. The same for Logitech and Stratasys has gone up by 4.4% and 27.8% respectively.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>