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Infienon (IFNNY) Q3 Earnings in Line; Weak Sales Hit Stock
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Semiconductor maker Infineon Technologies AG (IFNNY - Free Report) reported adjusted earnings per share (“EPS”) of €0.19 (21 cents) in third-quarter fiscal 2016, in line with Zacks Consensus Estimate. Adjusted earnings were however up 5.5% on a year-over-year basis. The year-over-year improvement in the bottom line came on the back of modest top-line growth.
Despite the in-line earnings performance, the company posted lower-than-expected revenue results, thanks to waning smartphone sales. This led to a 4.3% drop in share price to $15.72 on Aug 2.
Inside the Headlines
Revenues rose 2.9% year over year to €1,632 million ($1,842.8 million) in the quarter but missed the consensus mark of $1869 million by 1.4%. The top-line growth came on the back of strong sales in two of the company’s four business segments, namely, Automotive and Industrial Power Control.
Automotive (“ATV”) revenues increased 8.9% year over year to €676 million ($763.3 million). Stringent environmental standards continue to trigger demand for electric and hybrid vehicles worldwide, thereby boosting growth at this segment. Meanwhile, sales in the quarter primarily benefited from higher demand for radar-based solutions for driver assistance systems and premium vehicles.
Industrial Power Control (“IPC”) revenues increased 4.1% year over year to €280 million ($316.2 million) on higher demand for renewables-related products. However, demand for electric drives and home appliances remained flat during the quarter.
Revenues at Chip Card and Security (“CSS”) came in at €172 million ($194.2 million), flat on a year-over-year basis. While demand for chips required for authentication solutions acted as a tailwind, softer market conditions caused a decline in payment cards sales, thereby offsetting the improvement.
However, Power Management and Multi-market (“PMM”) revenues edged down 1.5% to €509 million ($574.7 million). Slowdown in smartphone sales and components for mobile communications played spoilsport.
At the end of the fiscal third quarter, Infineon recorded operating income of €193 million ($217.9 million) compared with €119 million in the year-ago quarter. Also, operating margin increased 430 basis points on a year-over-year basis.
Liquidity
Infineon’s cash and cash equivalents were €610 million ($677.3 million) as of Jun 30, 2016, up from €606 million as on Mar 31, 2016. As of Jun 30, 2016, the company’s long-term debt totaled €1,767 million ($1,962.0 million), up from €928 million as on Mar 31, 2016.
For the three months ended Jun, 30 2016, the company had net cash from continuing operations of €496 million ($550.7 million), up from €432 million as of Jun 30, 2015.
Outlook
Infineon provided the fourth-quarter fiscal 2016 guidance wherein revenues are expected to increase 3% with a possible deviation of plus or minus 2%. Segmental margin is predicted at 17% (the mid-point of the forecasted revenue range). The outlook is based on an assumed exchange rate of $1.10 for the second half of fiscal 2016.
Also, the company reiterated its full-year-2016 guidance wherein revenues are expected to increase about 12% (with a possible deviation of plus or minus 2%). Also, segmental margin is projected to grow in the band of 15–16% at the mid-point of the revenue guidance.
Infineon’s third-quarter fiscal 2016 results can at best be described as mixed with tepid revenue growth being a dampener. Going forward, we believe slowdown in smartphone sales can prove to be a major drag, marring revenues at the PMM segment. Also, the cyclical nature of the semiconductor industry, constant and swift technological changes, rapid product obsolescence and price erosion may be major headwinds going forward.
Infineon currently carries a Zacks Rank #4 (Sell). Better-ranked stocks in the industry include Amkor Technology, Inc. (AMKR - Free Report) , Cirrus Logic, Inc. (CRUS - Free Report) and Silicon Motion Technology Corp. (SIMO - Free Report) . All the three stocks sport a Zacks Rank #1 (Strong Buy).
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Infienon (IFNNY) Q3 Earnings in Line; Weak Sales Hit Stock
Semiconductor maker Infineon Technologies AG (IFNNY - Free Report) reported adjusted earnings per share (“EPS”) of €0.19 (21 cents) in third-quarter fiscal 2016, in line with Zacks Consensus Estimate. Adjusted earnings were however up 5.5% on a year-over-year basis. The year-over-year improvement in the bottom line came on the back of modest top-line growth.
Despite the in-line earnings performance, the company posted lower-than-expected revenue results, thanks to waning smartphone sales. This led to a 4.3% drop in share price to $15.72 on Aug 2.
Inside the Headlines
Revenues rose 2.9% year over year to €1,632 million ($1,842.8 million) in the quarter but missed the consensus mark of $1869 million by 1.4%. The top-line growth came on the back of strong sales in two of the company’s four business segments, namely, Automotive and Industrial Power Control.
Automotive (“ATV”) revenues increased 8.9% year over year to €676 million ($763.3 million). Stringent environmental standards continue to trigger demand for electric and hybrid vehicles worldwide, thereby boosting growth at this segment. Meanwhile, sales in the quarter primarily benefited from higher demand for radar-based solutions for driver assistance systems and premium vehicles.
Industrial Power Control (“IPC”) revenues increased 4.1% year over year to €280 million ($316.2 million) on higher demand for renewables-related products. However, demand for electric drives and home appliances remained flat during the quarter.
Revenues at Chip Card and Security (“CSS”) came in at €172 million ($194.2 million), flat on a year-over-year basis. While demand for chips required for authentication solutions acted as a tailwind, softer market conditions caused a decline in payment cards sales, thereby offsetting the improvement.
However, Power Management and Multi-market (“PMM”) revenues edged down 1.5% to €509 million ($574.7 million). Slowdown in smartphone sales and components for mobile communications played spoilsport.
At the end of the fiscal third quarter, Infineon recorded operating income of €193 million ($217.9 million) compared with €119 million in the year-ago quarter. Also, operating margin increased 430 basis points on a year-over-year basis.
Liquidity
Infineon’s cash and cash equivalents were €610 million ($677.3 million) as of Jun 30, 2016, up from €606 million as on Mar 31, 2016. As of Jun 30, 2016, the company’s long-term debt totaled €1,767 million ($1,962.0 million), up from €928 million as on Mar 31, 2016.
For the three months ended Jun, 30 2016, the company had net cash from continuing operations of €496 million ($550.7 million), up from €432 million as of Jun 30, 2015.
Outlook
Infineon provided the fourth-quarter fiscal 2016 guidance wherein revenues are expected to increase 3% with a possible deviation of plus or minus 2%. Segmental margin is predicted at 17% (the mid-point of the forecasted revenue range). The outlook is based on an assumed exchange rate of $1.10 for the second half of fiscal 2016.
Also, the company reiterated its full-year-2016 guidance wherein revenues are expected to increase about 12% (with a possible deviation of plus or minus 2%). Also, segmental margin is projected to grow in the band of 15–16% at the mid-point of the revenue guidance.
INFINEON TECH Price, Consensus and EPS Surprise
INFINEON TECH Price, Consensus and EPS Surprise | INFINEON TECH Quote
To Conclude
Infineon’s third-quarter fiscal 2016 results can at best be described as mixed with tepid revenue growth being a dampener. Going forward, we believe slowdown in smartphone sales can prove to be a major drag, marring revenues at the PMM segment. Also, the cyclical nature of the semiconductor industry, constant and swift technological changes, rapid product obsolescence and price erosion may be major headwinds going forward.
Infineon currently carries a Zacks Rank #4 (Sell). Better-ranked stocks in the industry include Amkor Technology, Inc. (AMKR - Free Report) , Cirrus Logic, Inc. (CRUS - Free Report) and Silicon Motion Technology Corp. (SIMO - Free Report) . All the three stocks sport a Zacks Rank #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>