Yahoo Finance Cree’s Shares Rose 9% after It Announced Fiscal 2Q16 Earnings
CREE Reports Strong Fiscal 2Q16 Earnings
Cree’s fiscal 2Q16 highlights
Cree (CREE), a supplier of LED (light emitting diodes) lighting and semiconductors for power and RF (radio frequency), reported fiscal 2Q16 results that beat the analysts’ estimate. The company managed to reduce its operating expenses through the restructuring of its LED business. Also, the commercial lighting and LED business posted strong growth that was offset by a fall in power and RF sales.
However, the company expects the weaker macroeconomic climate and seasonal weakness to affect its fiscal 3Q16 revenue. This is an industry-wide scenario, with semiconductor companies such as Advanced Micro Devices (AMD), Intel (INTC), and Linear Technology (LLTC) reporting weaker guidance for the March 2016 quarter.
Cree beats analysts’ estimate
In fiscal 2Q16, the company’s revenue rose 5% YoY (year-over-year) to $435.8 million, beating the analysts’ estimate of $434.7 million. Its non-GAAP EPS (earnings per share) fell 9% YoY to $0.30, topping the consensus estimate of $0.24. The company reported better-than-expected EPS as the reinstatement of the research and development tax credit lowered the tax rate.
After the earnings release, the company’s stock rallied 9.7% to $26.6 on January 20, 2016.
Huge gap in GAAP and non-GAAP earnings
As Cree completed a restructuring in fiscal 2016, there’s now a large gap in the GAAP and non-GAAP earnings. The non-GAAP earnings exclude:
$3 million spent on capacity and overhead restructuring
$11 million spent on stock-based compensation
$7 million spent on amortization
$2 million spent on the Wolfspeed initial public offering that has been delayed until the second half of fiscal 2016
Note that Wolfspeed is the company’s semiconductor and RF business.
Profitability
On a non-GAAP basis, Cree’s gross margin fell from 33.9% in fiscal 2Q15 to 31.7% in fiscal 2Q16, while its operating margin fell from 8.2% to 8.1% during the same period. Net income fell 20% YoY to $30.5 million.
In the next part of the series, we’ll look at the performance of each business segment in fiscal 2Q16. The PowerShares QQQ ETF (QQQ) has ~8% exposure in all types of semiconductor stocks, including mid-cap and small-cap firms. It has 0.20% exposure in LLTC and 2.9% in INTC.
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