Anadigics Inc. (ANAD) reported a narrow loss for the first quarter of 2010 on April 26, 2010 compared with the Zacks Estimate. Net loss for the quarter came in at $5.2 million or 8 cents per share, better than the Zacks Consensus Estimate of 9 cents per share. Following the release of better-than-expected results, most Wall Street analysts have upped their estimates in the last 30 days.
Headquartered in Warren, New Jersey, Anadigics designs and manufactures semiconductor solutions for the broadband wireless and wireline communications markets.
Let us now take a look at the earnings announcement, subsequent analyst estimate revisions and Zacks ratings for the short term and long term outlook for the stock.
Earnings Report Review
The first quarter results beat management expectations as well resulting from stronger demand of wireless 3G products, particularly, wideband CDMA. Net sales of $43.5 million in the first quarter of 2010 were up 4.1% sequentially and up 42.7% year over year. The results beat management’s guidance of flat revenues sequentially.
Earnings Estimate Revisions- Overview
Estimates have gone up for Anadigics since the earnings release as the company reported a smaller loss than expected by most analysts for two consecutive quarters after dismal results in late 2008 to early 2009.
In addition, the outlook provided by management beat Wall Street estimates, leading to an increase in estimates. Management expects to report a profit in the second quarter excluding stock-based compensation and restructuring charges.
Agreement of Estimate Revisions
There is a consensus in estimate revisions. For 2010, four of the six analysts covering the stock raised their estimates in the last 30 days after the company reported better-than-expected results for the first quarter. There were no revisions in the opposite direction. For 2011, three of the six analysts covering the stock raised their estimates, with no downward revisions.
For the quarter (ending June), four of the six analysts covering the stock raised their estimates, with no revision in the opposite direction.
Magnitude of Estimate Revisions
The current Zacks Consensus Estimate for 2010 is a loss of 15 cents. This is significantly better than the estimate of a loss of 27 cents thirty days ago. The key initiatives for 2010 are capitalizing on the growth of 3G and 4G markets by introducing new and superior products and improving operational efficiency thereby, achieving profitability.
For 2011, the current Zacks Consensus Estimate is a loss of one cent, representing a big improvement from the earlier estimate of a loss of 20 cents before the release of first quarter results. This clearly signals a turnaround of events for Anadigics, which has been plagued by numerous problems for the past eighteen months or so.
Anadigics has constantly exceeded expectations. In the most recently reported quarter, the company reported earnings, which were 11.11% above the Zacks Consensus Estimate. On average, Anadigics has come ahead of the Zacks Consensus Estimate by 22.14% in the last four quarters.
The current Zacks Consensus Estimate for the third quarter is a loss of 4 cents compared with the earlier estimate of 9 cents.
Neutral on Anadigics
Anadigics is now looking to grow market share, which was negatively impacted since 2008 due to production inefficiencies followed by a period of low demand due to the economic crisis.
Management stated that new product releases and design wins continue to be strong as the company gains market share in wireless markets and across its customer base.
We expect overall revenue growth to pick up in 2010, leading to improvements in both top- and bottom-line. Management expects sales to increase 12% sequentially in the next quarter. Gross margin is anticipated at 35%, up from 32.3% reported in the first quarter. As of now, we would like to be on the sidelines and maintain a Neutral rating on the stock which is supported by the Zacks Rank #3.