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Ultra Clean (UCTT) Shares Falter on Lower Q4 Top-Line View

Ultra Clean Holdings UCTT shares tanked 7.28% to close at $33.10 on Jan 9, after the company revised its fourth-quarter 2022 revenue guidance.  

This Hayward, CA-based semiconductor component supplier expects revenues between $560 million and $570 million, lower than its prior outlook of $600-$650 million. The company expected 2022 revenues to grow 16% over 2021.

Ultra Clean cited lower customer orders on a weak industry environment and production issues due to the resurgence of COVID in China as the primary reasons behind the revised outlook.

Ultra Clean shares have declined 38.3% in the past year, underperforming the Zacks Computer & Technology’s fall of 18% over the same time frame.

Ultra Clean Holdings, Inc. Price and Consensus

 

Ultra Clean Holdings, Inc. price-consensus-chart | Ultra Clean Holdings, Inc. Quote

Ultra Clean Prospects Hurt by Sluggish Demand

The semiconductor industry has been reeling from the pandemic-induced supply-chain issues and component shortages amid raging inflation and tightening monetary policies by Central Banks globally. The threat of a looming recession this year is affecting the demand and spending on capital equipment.

On its third-quarter earnings conference call, Ultra Clean warned of a decrease in the demand level and inventory correction by chipmakers in the near term.

Gartner expects semiconductor revenues to decline 3.6% in 2023 compared with an estimated 4% in 2022.

Per the latest data from The Semiconductor Industry Association, global semiconductor sales growth declined 2.9% month over month in November 2022. Sales of $45.5 billion declined 9.2% compared with November 2021’s figure of $50 billion.

Nevertheless, long-term trends remain favorable for semiconductors as demand for AI-driven solutions, electric cars, and autonomous vehicles, IoT devices, and high-power computing increases significantly.

This trend bodes well for Ultra Clean. The company’s expanding facility in Malaysia is a key catalyst in this regard.

Zacks Rank & Stocks to Consider

Ultra Clean currently has a Zacks Rank #3 (Hold).

Arista Networks ANET, Asure Software ASUR and MKS Instruments MKSI are some better-ranked stocks in the broader Computer & Technology sector. While Arista currently sports a Zacks Rank #1 (Strong Buy), Asure and MKS Instruments carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Arista shares have dropped 12.7% in the past year. The Zacks Consensus Estimate for ANET’s fourth-quarter 2022 earnings stands at $1.21 per share, unchanged over the past 30 days.

Asure shares have gained 35.9% in the past year. The Zacks Consensus Estimate for ASUR’s fourth-quarter 2022 earnings stands at 1 cent per share, unchanged over the past 30 days.

MKSI shares have declined 41.9% in the past year. The consensus mark for MKS Instruments’ fourth-quarter 2022 earnings stands at $1.32 per share, down a penny over the past 30 days.

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Ultra Clean Holdings, Inc. (UCTT) : Free Stock Analysis Report

MKS Instruments, Inc. (MKSI) : Free Stock Analysis Report

Asure Software Inc (ASUR) : Free Stock Analysis Report

Arista Networks, Inc. (ANET) : Free Stock Analysis Report

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Zacks Investment Research