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Cypress Semiconductor (CY) Earnings Miss Estimates in Q4
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Cypress Semiconductor Corp. reported adjusted fourth-quarter 2016 earnings of 6 cents per share, missing the Zacks Consensus Estimate by a penny. Adjusted earnings exclude one-time items but include stock-based compensation expense.
Over the past one year, shares of Cypress outperformed the Zacks categorized Semiconductor Communications industry. While the industry gained 60.95%, the stock returned 65.44%.
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 $72.3 million to its fourth-quarter revenues.
Cypress also recognized $188.5 million of annualized synergies associated with the Spansion merger, which surpassed the company’s expectations. The integration is 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.
The Numbers in Detail
Revenues
Cypress reported non-GAAP revenues of $530.2 million, flat sequentially and up 16.2% year over year. Revenues were within management’s guided range of $510–$540 million and above the Zacks Consensus Estimate of $525 million.
Revenues by Business Units
Starting fourth-quarter of 2016, the company reorganized its reporting structure into two divisions. These divisions are Microcontroller and Connectivity Division (MCD) and Memory Products Division (MPD).
Notably, MCDincludes Microcontroller and PSoC product lines of the former Programmable Systems Division, Wireless Connectivity/IoT and USB product lines of the former Data Communications Division, the foundry business from the former Emerging Technologies Division (ETD) and the Intellectual Property Business Unit, which was formerly part of the Memory Products Division.
Revenues from this segment increased 4% sequentially to $294.9 million, driven by strong growth in the automotive and the IoT business. The company’s automotive business grew almost 14% year over year.
The other division, MPD, includes Flash, SRAM and specialty memories, as well as the AgigA Tech subsidiary, which was formerly part of ETD. Revenues from this segment decreased 2% sequentially to $235.3 million due to a decline in the company’s NOR Flash business.
Operating Results
Pro forma gross margin was 40.1%, down 40 basis points (bps) sequentially. The decrease was mainly because of an unfavorable mix.
Operating expenses (research & development and selling, general & administrative) of $169 million decreased 5.9% sequentially. Also, as a percentage of sales, both research and development expenses as well as selling, general and administrative expense decreased.
GAAP net loss was $72.4 million or loss of 22 cents per share versus net income of $9.41 million or earnings per share of 3 cents in the previous quarter. 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 $121.1 million compared with $847.4 million last quarter. Trade receivables were $333 million, down from $349.8 million in the previous quarter. Net inventory was $287.8 million, up from $247.7 million in the previous quarter.
During the quarter, Cypress’ cash flow from operations was approximately $89.8 million and capex was $11.9 million. The company also paid quarterly dividend worth $35.4 million or 11 cents per share.
Q1 Guidance
Management expects first-quarter 2017 revenues in the range of $495.0–$525.0 million. The Zacks Consensus Estimate is pegged at $494.9 million.
Consolidated GAAP gross margin is expected at roughly 37% (+/- 50 bps), depending on utilization, product and customer mix. Pro forma gross margin is expected at roughly 39% (+/- 50 bps).
GAAP earnings per share are expected in the range of (22) cents to (18) cents. Pro forma earnings per share are expected in the range of 9 cents to 13 cents. The Zacks Consensus Estimate is pegged at 5 cents.
Cypress Semiconductor Corporation Price, Consensus and EPS Surprise
Texas Instruments delivered a positive earnings surprise of 7.09%, on average, in the trailing four quarters.
NVIDIA Corporation delivered a positive earnings surprise of 24.93%, on average, in the trailing four quarters.
Itron, Inc. delivered a positive earnings surprise of 30.55%, on average, in the past four quarters.
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Cypress Semiconductor (CY) Earnings Miss Estimates in Q4
Cypress Semiconductor Corp. reported adjusted fourth-quarter 2016 earnings of 6 cents per share, missing the Zacks Consensus Estimate by a penny. Adjusted earnings exclude one-time items but include stock-based compensation expense.
Over the past one year, shares of Cypress outperformed the Zacks categorized Semiconductor Communications industry. While the industry gained 60.95%, the stock returned 65.44%.
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 $72.3 million to its fourth-quarter revenues.
Cypress also recognized $188.5 million of annualized synergies associated with the Spansion merger, which surpassed the company’s expectations. The integration is 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.
The Numbers in Detail
Revenues
Cypress reported non-GAAP revenues of $530.2 million, flat sequentially and up 16.2% year over year. Revenues were within management’s guided range of $510–$540 million and above the Zacks Consensus Estimate of $525 million.
Revenues by Business Units
Starting fourth-quarter of 2016, the company reorganized its reporting structure into two divisions. These divisions are Microcontroller and Connectivity Division (MCD) and Memory Products Division (MPD).
Notably, MCDincludes Microcontroller and PSoC product lines of the former Programmable Systems Division, Wireless Connectivity/IoT and USB product lines of the former Data Communications Division, the foundry business from the former Emerging Technologies Division (ETD) and the Intellectual Property Business Unit, which was formerly part of the Memory Products Division.
Revenues from this segment increased 4% sequentially to $294.9 million, driven by strong growth in the automotive and the IoT business. The company’s automotive business grew almost 14% year over year.
The other division, MPD, includes Flash, SRAM and specialty memories, as well as the AgigA Tech subsidiary, which was formerly part of ETD. Revenues from this segment decreased 2% sequentially to $235.3 million due to a decline in the company’s NOR Flash business.
Operating Results
Pro forma gross margin was 40.1%, down 40 basis points (bps) sequentially. The decrease was mainly because of an unfavorable mix.
Operating expenses (research & development and selling, general & administrative) of $169 million decreased 5.9% sequentially. Also, as a percentage of sales, both research and development expenses as well as selling, general and administrative expense decreased.
GAAP net loss was $72.4 million or loss of 22 cents per share versus net income of $9.41 million or earnings per share of 3 cents in the previous quarter. 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 $121.1 million compared with $847.4 million last quarter. Trade receivables were $333 million, down from $349.8 million in the previous quarter. Net inventory was $287.8 million, up from $247.7 million in the previous quarter.
During the quarter, Cypress’ cash flow from operations was approximately $89.8 million and capex was $11.9 million. The company also paid quarterly dividend worth $35.4 million or 11 cents per share.
Q1 Guidance
Management expects first-quarter 2017 revenues in the range of $495.0–$525.0 million. The Zacks Consensus Estimate is pegged at $494.9 million.
Consolidated GAAP gross margin is expected at roughly 37% (+/- 50 bps), depending on utilization, product and customer mix. Pro forma gross margin is expected at roughly 39% (+/- 50 bps).
GAAP earnings per share are expected in the range of (22) cents to (18) cents. Pro forma earnings per share are expected in the range of 9 cents to 13 cents. The Zacks Consensus Estimate is pegged at 5 cents.
Cypress Semiconductor Corporation Price, Consensus and EPS Surprise
Cypress Semiconductor Corporation Price, Consensus and EPS Surprise | Cypress Semiconductor Corporation Quote
Zacks Rank and Stocks to Consider
Currently, Cypress Semiconductor has a Zacks Rank #4 (Sell). Stocks worth considering in the industry include Texas Instruments (TXN - Free Report) , carrying a Zacks Rank #1 (Strong Buy) and Itron, Inc. (ITRI - Free Report) and NVIDIA Corporation (NVDA - Free Report) , both carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Texas Instruments delivered a positive earnings surprise of 7.09%, on average, in the trailing four quarters.
NVIDIA Corporation delivered a positive earnings surprise of 24.93%, on average, in the trailing four quarters.
Itron, Inc. delivered a positive earnings surprise of 30.55%, on average, in the past four quarters.
The Best Place to Start Your Stock Search
Today, you are invited to download the full list of 220 Zacks Rank #1 ""Strong Buy"" stocks – absolutely free of charge. Since 1988, Zacks Rank #1 stocks have nearly tripled the market, with average gains of +26% per year. Plus, you can access the list of portfolio-killing Zacks Rank #5 ""Strong Sells"" and other private research. See these stocks free >>