Cree (CREE) Q1 Earnings Beat, Revenues Lag, Shares Fall

Shares of Cree Inc. CREE plunged almost 14% in the last three sessions, following its first-quarter fiscal 2017 results. Though earnings of 6 cents per share comfortably beat the Zacks Consensus Estimate by 3 cents but it declined 57.8% on a year-over-year basis.

Revenues also decreased 15.8% year over year to $321.3 million and missed the Zacks Consensus Estimate of $326.8 million.

Quarter Details

Cree has two reportable segments – Lighting Products (primarily consisting of LED lighting systems and bulbs) and LED Products (includes LED chips and LED components).

Lighting Products generated revenues to the tune of $183.8 million, which accounted for 57.2% of total revenue and was down 25.9% on a year-over-year basis.

On the other hand, LED Products generated revenues of $137.5 million, which accounted for 42.8% of total revenue and was up 3% on a year-over-year basis.  

Non-GAAP gross margin was 26.9%, which contracted roughly 120 basis points (bps) on a year-over-year basis.

Non-GAAP operating loss was $3.9 million against a profit of $5.8 million in the year-ago quarter.

Expansion of the Essentia Range

Recently, Cree expanded its Essentia by Cree line of products with the introduction of the new LED Surface Wrap in a bid to bolster sales in the consumer lighting segment. (Read More: Cree Expands the Essentia Range to Boost Revenue Growth)

Wolfspeed Divestment for $850 Million

Cree and Infineon Technologies AG INFN recently inked a definitive agreement under which the latter will acquire Cree’s Wolfspeed Power and RF division. (Read More: Infineon to Buy Cree's Wolfspeed for $850M, Shares Flat)

Balance Sheet

Cree exited the fiscal first quarter of 2017 with cash, cash equivalents and short-term investments of $589 million that decreased 2.7% on a sequential basis. Inventories were $291.5 million, up 3.5% sequentially.

Guidance

For the second-quarter of fiscal 2017, Cree’s management expects combined revenues to be in the range of $360 million to $380 million (including both continued and discontinued operations). Out of this, $310 million to $330 million of revenues will likely come from continuing operations.

Non-GAAP net income is estimated to be in the range of $13 million to $19 million, which translates to earnings of 13 cents to 19 cents per share. This excludes $21 million of expenses related to stock-based compensation expense, impairment or amortization of acquisition-related intangibles as well as transaction costs related to the sale of the Wolfspeed business.

CREE INC Price and EPS Surprise

CREE INC Price and EPS Surprise | CREE INC Quote

Zacks Rank

Cree has Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology space are Inovalon Holdings, Inc. INOV and SITO Mobile, Ltd. SITO, sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Notably, the consensus estimate for Inovalon’s current year has remained stable at 38 cents over the last 60 days.

The consensus estimate for SITO Mobile has been revised upward to 4 cents from a loss of 3 cents over the last 30 days. 

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