Investors Sell Cree (CREE) Shares as Q1 Earnings Miss, Guidance Mixed

October 18, 2011 5:44 PM EDT
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Price: $28.05 +1.56%

EPS Growth %: -73.3%

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Net income: 152K

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Cree, Inc. (Nasdaq: CREE) reported its first-quarter 2012 results Tuesday afternoon. Although still very volatile, shares are down more than 5 percent in the after-hours session.

Sales rose 2 percent year over year to $269 million. The number topped the consensus which was looking for sales of $268.73 million.

GAAP net income totaled $12.8 million, or $0.11 per diluted share, a 78 percent decrease from the year-ago quarter. On a non-GAAP basis, net income for the first quarter was $28.1 million, or $0.25 per diluted share, a 58 percent decrease from the first quarter of 2011 and below the analyst consensus of $0.26.

“We got off to a good start in Q1 as results were in-line with our updated targets and our LED lighting and LED components product lines continued to grow,” stated Chuck Swoboda, Cree chairman and CEO. “We also took the next step in our strategy to lead the LED lighting revolution with the acquisition of Ruud Lighting. Although we have seen tremendous growth in LED lighting sales over the last few years, it is clear that we have only scratched the surface of LED lighting adoption and there is growing demand for products that offer innovative solutions and good payback.”

Management noted results for the quarter reflect the acquisition of Ruud Lighting on August 17, 2011, approximately one month before the end of the quarter.

GAAP gross margin for the quarter was 36.4 percent, down 12.2 percent year over year. GAAP operating margin fell to 5 percent in the quarter from 27.3 percent in the first quarter of fiscal 2011.

Non-GAAP gross margin for the quarter was 37.4 percent, down 11.6 percent year over year. Non-GAAP Operating margin fell to 12.2 percent in the quarter from 31.3 percent in the first quarter of fiscal 2011.

Cash and investments ended the quarter at $632.2 million, a decrease of $453.6 million from last quarter due to the disbursement of $457 million as part of the Ruud Lighting acquisition. Cash flow from operations was $41.6 million.

For its second quarter of fiscal 2012 ending December 25, 2011, Cree targets revenue in a range of $300 million to $320 million with GAAP and non-GAAP gross margin targeted to be in a similar range as the first quarter at 37-38 percent. Analysts are currently expecting sales of $310.7 million for the second quarter.

GAAP operating expenses are targeted to increase by approximately $10 million to $95 million, or $78 million on a non-GAAP basis. The tax rate is targeted at 21.5 percent for fiscal Q2.

GAAP net income is targeted at $13-$18 million, or $0.11-$0.15 per diluted share. Non-GAAP net income is targeted in a range of $29-$33 million, or $0.25-$0.28 per diluted share. The consensus is currently set at $0.34 per share for the second quarter.

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