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Analyst Blog

On Jul 4, 2013, we upgraded photographic image company, Fujifilm Holdings Corporation (FUJIY - Analyst Report) to Neutral from Underperform based on the company’s strong fiscal fourth quarter 2013 results.

Why the Upgrade?

Fujifilm’s net income in the fiscal fourth quarter of 2013 increased 26.7% year over year to ¥25.4 billion ($275.7 million). Revenues in the quarter increased 4.6% year over year to ¥603.5 billion ($6,546.5 million). The launch of new products paved the way for the increase.

Following such strong results, Fujifilm expects revenues in fiscal 2014 to be ¥2,350.0 billion, up 6.1% year over year. Operating income is expected to be ¥140.0 million, an increase of 22.7% over fiscal 2013. Also, Fujifilm expects its net income for the coming fiscal to be ¥70.0 billion, increasing 29.0% year over year.

Various acquisitions undertaken by Fujifilm also helped the company prosper. Fujifilm acquired Sonosite in Mar 2012, which has been contributing immensely to the company’s business since then. Moreover, Fujifilm also acquired the BPO division of Australia-based Salmat last August. Fujifilm intends to utilize the division to expand its reach in the Asia-Oceana region.

Fujifilm continues to expand its diverse operations, with sales in the pharmaceuticals business of the company jumping 20% year over year in fiscal 2013. The company expects to continue deriving significant revenues from the segments in the coming quarters, especially pharmaceuticals.

However, Fujifilm’s presence outside Japan makes it prone to various economic and socio political risks in the regions of operations. The recent economic downturn in Europe was a major blow to the company’s financials in fiscal 2013. Moreover, the company’s results are hurt by the ever increasing prices of raw materials. This may lead to high cost of production, thereby impacting margins.

Other Stocks to Consider

Fujifilm currently carries a Zacks Rank #1 (Strong Buy). Some of the companies that compete with Fujifilm in diverse operations are Alliance Fiber Optic Products Inc. (AFOP - Snapshot Report), carrying a Zacks Rank #1 (Strong Buy), and Cohu, Inc. (COHU - Snapshot Report) and Ciena Corporation (CIEN - Analyst Report) both carrying a Zacks Rank #2 (Buy).

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