Canaccord and D.A. Davidson have downgraded Cree (CREE -16.7%) to neutral ratings after the company offered a weaker-than-expected FQ2 outlook and reported a 580 bps Q/Q gross margin drop.
Canaccord's Jonathan Dorsheimer, who wasn't quite enthusiastic about reiterating a Buy following Cree's Oct. 2 FQ1 warning: "In spite of the fact that we may be...marking the bottom for CREE shares, we simply fail to see a potentially positive catalyst ... Our thesis was based around the transition from captive to merchant sales in Cree’s components [business], which at best has been pushed by 6-9 months now."
He adds Canaccord's research confirms Cree has lost LED component share to Philips' Lumileds unit, and that a shift towards mid-power LED sales in China is also taking a toll.
Cowen's Jeffrey Osborne (Market Perform) thinks margins will stabilize as Cree cuts factory output, continues seeing healthy lighting and power/RF growth, and gets a lighting margin boost from a mix shift to non-bulb lighting products. He's still cautious on account of Cree's near-term LED component challenges, but expects the company's technology strengths will help its cause long-term.
Fellow LED industry names Rubicon (RBCN -2.3%), Veeco (VECO -3.7%), and Aixtron (AIXG -2.5%) are also lower.
Though Veeco (NASDAQ:VECO) beat Q2 estimates, it's guiding for Q3 revenue of $92M-$100M and EPS of -$0.07 to -$0.15, below a consensus of $104.9M and -$0.04 (history repeating).
Orders rose 1% Q/Q in Q2 to $104M, and were above revenue of $95.1M. MOCVD orders (LED-driven) totaled $75M, data storage $25M, and MBE $6M.
Veeco say it's still seeing "positive trends in the LED market, including strong LED chip demand, very high LED fab utilization rates and solid customer quoting activity." LED equipment demand has been depressed for some time, in spite of strong end-user consumption.
Gross margin fell to 32.3% from 35.6% a year ago. GAAP opex +13% to $46.6M.
Though it beat Q1 estimates, Veeco (VECO) expects Q2 revenue of $87M-$97M and EPS of -$0.23 to -$0.14, largely below a consensus of $96.8M and -$0.11.
Q1 orders totaled $103M, up 21% Q/Q and 47% Y/Y, and above revenue of $90.8M. MOCVD equipment orders rose 59% Q/Q to $83M thanks to rising demand from LED manufacturers in Asia and elsewhere. Data Storage orders fell to $15 from $22M in Q4, and MBE orders fell to $5M from $11M.
Veeco asserts LED fab utilization rates "have improved to high levels at most key accounts and LED adoption is happening faster than many had expected." But it also cautions MOCVD orders could be "lumpy and unpredictable on a quarterly basis," and that the company lacks 2H visibility. Q2 orders are expected to be at or above Q1 levels.
Rival Aixtron (AIXG), which moved higher last week following its Q1 report, might follow Veeco lower.
Though Aixtron (AIXG +2.3%) missed Q1 estimates, it reiterated guidance for 2014 revenue to be flat Y/Y. Earnings are expected to improve from 2013 levels, but an EBIT loss is still forecast.
In addition, the LED equipment maker's orders 2% Q/Q and 26% Y/Y in Q1 to €37.7M. Quarter-ending backlog was €64.2M, -18% Y/Y but +8% Q/Q.
Gross margin was 25% - down from seasonally strong Q4's 34%, but much better than the year-ago period's -119% (no typo).
The company notes capacity utilization among LED customers "remains at relatively high levels" amid growing demand, and thinks "sentiment among customers is improving as the growth in the LED market drives the customers' profitability." At the same time, it observes "there was still no noticeable increase in investments in LED manufacturing capacity expansions" in Q1.
Rival Veeco (VECO +2.5%) and LED wafer vendor Rubicon (RBCN +1.2%) are higher on a good day for tech. Rubicon reports on Thursday, and Veeco on May 5.
AVG expects 2014 revenue of $365M-$405M and EPS of $1.80-$2.10, in-line with a consensus of $394.3M and $1.92. Shares +7.8% AH. (Q4 results, PR)
Equinix (EQIX) expects Q1 revenue of $572M-$576M and 2014 revenue of more than $2.38B. Those figures are unfavorable to consensus estimates of $578.5M and $2.41B. Full-year adjusted EBITDA is expected to be above $1.1B, up from 2013's $1B. The 2014 capex budget is set at $550M-$600M. Shares +2.3% AH. (Q4 results, PR)
Veeco (VECO) expects Q1 revenue of $85M-$95M, above an $80.8M consensus. Q4 bookings totaled $85M, -7% Q/Q but above revenue of $73.2M. Shares +3.5% AH. (Q4 results, PR)
Arris (ARRS) expects Q1 revenue of $1.17B-$1.21B and EPS of $0.42-$0.47 vs. a consensus of $1.15B and $0.46. Q4 book-to-bill was 1.01, and order backlog stood at $538.6M at quarter's end. Shares +2.4% AH. (Q4 results, PR)
Though its FQ3 guidance is only in-line, investors are giving a resounding thumbs-up to Cree's (CREE +7.7%) FQ2 report, given it featured solid revenue and earnings beats on the back of strong LED lighting growth, and signs the margin pressure lately faced by the company could be softening.
LED wafer supplier Rubicon (RBCN +5%) is also up sharply, as are equipment vendors Veeco (VECO +6.5%) and Aixtron (AIXG +4.6%).
Cree's lighting product sales rose 42% Y/Y in FQ2 (a pickup from FQ1's 37% growth), and now make up 42% of the company's revenue (up from 38% in FQ2). Just as importantly, Cree's lighting gross margin, hurt lately by aggressive pricing for consumer LED bulbs at Home Depot and elsewhere, rose 100 bps Q/Q to 27.9% (albeit while falling 580 bps Y/Y).
LED product sales (components) rose 7% Y/Y after growing 16% in FQ1, and now make up 52% of revenue (down from 56%). Gross margin was 45.4%, -120 bps Q/Q but +350 bps Y/Y. Power/RF product sales rose 17% Y/Y, and carried a 58% gross margin (+430 bps Q/Q and +140 bps Y/Y).
Goldman (Buy) thinks Cree's numbers demonstrate LED lighting adoption is "in the early innings," and believes its guidance "implies a return to 30%+ gross margin in lighting after several disappointing quarters." The firm is also pleased sell-through at Home Depot doubled Q/Q, and considers Cree well-positioned for "a potentially break-out June."
Needham (Hold) is more cautious. It's worried a mix shift towards bulbs will keep margins pressured, notes capacity constraints are limiting sales of high-margin LED components, and considers Cree "fairly valued" at 29x 2015E EPS.
Though Veeco (VECO -3.1%) beat Q3 revenue estimates (while missing EPS forecasts), its bookings for the quarter only totaled $92M. While that figure is up from depressed Q2 and year-ago levels of $85M and $84M, it fell short of Q3 revenue of $99.3M, and yielded a book-to-bill of just 0.93, below a 1H level of 0.97.
Orders for Veeco's MOCVD systems (used in LED/solar manufacturing) rose 28% Q/Q to $67M. However, orders for MBE and hard drive equipment respectively fell to just $7M and $18M. In spite of the Q/Q order pickup, Veeco says it hasn't yet seen an MOCVD demand recovery.
Gross margin was 30.5%, down from 37.5% a year ago. While revenue fell 25% Y/Y, opex declined 5%.
Following a lengthy delay caused by an accounting review, Veeco (VECO +12.6%) reports it had 2012 revenue of $516M (-47.3% Y/Y) and EPS from continuing ops of $0.68. The numbers compare with a consensus (possibly outdated) of $509.6M and $1.31. (PR)
Veeco, which (like peers) has been hurt by LED and solar manufacturing overcapacity, also reports it had 1H revenue of $159.2M (-42% Y/Y), and EPS of -$0.37.
2012 bookings totaled $391.9M (-52% Y/Y), and 1H bookings $155.2M (-28%). Whereas 2012 book-to-bill was a mere 0.76, 1H book-to-bill (aided by the revenue decline) was 0.97.
2012 gross margin was 41.7% (-670 bps Y/Y), and 1H gross margin was 35.9% (-990 bps). 1H SG&A spend 3% Y/Y to $39.4M, and R&D spend -12% to $41.6M.
Veeco has filed its 2012 10-K, and 10-Qs (I, II, III) for Q3 2012, Q1 2013, and Q2 2013. The LED/solar equipment maker says its Q3 10-Q is said to be on the way; a CC will be held after the filing is made.
Anyone following $VECO for a possible buy it is up 1.13 this morning but still off 52wk high considerably?
Jan 9, 10:18 AM
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VECO vs. ETF Alternatives
Veeco Instruments Inc designs, manufactures and markets equipment mainly sold to make light emitting diodes and hard-disk drives, as well as for emerging applications, such as concentrator photovoltaics, power semiconductors and wireless components.