Cree, Inc. (NASDAQ:CREE) is expected to report double-digit gains in its earnings per share when it announces its first quarter results onOct.22. The company would hold a conference call on the same day 5:00 p.m. EDT to discuss the results.
Based in Durham, North Carolina, Cree makes lighting-class LEDs, LED lighting and semiconductor products for power and radio-frequency (RF) applications. Cree's product families include LED fixtures and bulbs, blue and green LED chips, high-brightness LEDs, lighting-class power LEDs, power-switching devices and RF devices.
Wall Street expects Cree to earn 39 cents a share, up 44.4 percent from 27 cents a share in the same quarter last year. Cree's earnings have managed to top Street view twice in the past four quarters while meeting them on two occasions.
Analysts have pulled back their estimates for Cree's earnings in the recent months. Over the past 90 days, the consensus estimate has decreased from 43 cents. Cree sees first quarter earnings of 23 to 28 cents a share and adjusted earnings of 36 to 41 cents a share.
Quarterly revenues are expected at $392.31 million, according to analysts polled by Thomson Reuters. The consensus estimate implies growth of 24.2 percent from $315.75 million revenue generated in the year-ago period. The company expects revenue of $380 million to $400 million.
In mid-August, investors had a tough time with Cree, which gave a disappointing outlook for the first quarter despite almost doubling its fourth quarter profit on 22 percent rise in sales. The worry stemmed from the competitors such as Universal Display (NASDAQ:OLED), which makes organic LED bulbs a market that has the potential to eat into the sales and margins of Cree.
In addition, regular rivals such as Acuity Brands (NYSE:AYI) and Philips Electronics are also making their giant strides in the LED lighting market.
As a result, lighting margins are back in focus for Cree. Given the reset in lighting margins, bulk of the risk is out o! f the way, but the big inflection in earnings power is unlikely for the next few quarters until lighting margins normalize and LED bulb/fixture revenues accelerate.
Investors would be looking at whether the company is able to mute growth concerns from its fourth quarter's results. Further visibility on the magnitude of margin recovery and associated earnings power would be required for shares to grind higher from these levels.
For the fourth quarter ended June 30, 2013, the company reported net income of $28.2 million or 23 a share, compared to $10.0 million or 9 cents a share for the year-ago quarter. Excluding items, the company earned 38 cents a share, in line with estimates. Net revenue for the fourth quarter rose 22 percent to $375.01 million, missing consensus view of $377.21 million.
Gross margin for the quarter improved to 37.5 percent from 34.8 percent a year ago while operating margin increased to 8.2 percent from 2.8 percent last year.
Shares of Cree have plunged about 20 percent on a single day over its weak first quarter outlook in in August. The stock, however, has recovered some of its losses and dropped 2.5 percent since its last quarterly report. They have gained 158 percent in the last year and traded between $28.08 and $76 during the past 52-weeks.
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