A month has gone by since the last earnings report for Cypress Semiconductor . Shares have lost about 4.4% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Cypress due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Cypress Q1 Earnings and Revenues Surpass Estimates
Cypress Semiconductor reported first-quarter 2019 non-GAAP earnings of 27 cents per share, beating the Zacks Consensus Estimate by 3 cents. The figure was down 22.9% sequentially but flat year over year.
Revenues of $539 million surpassed the Zacks Consensus Estimate of $535 million. The figure reflects a year-over-year decline of 7.4%.
During the quarter, the company experienced softness in all end-markets served, namely automotive, legacy and IoT.
On Apr 1, Cypress closed its joint venture (JV) with SK hynix system ic, Inc. Post this move, the company expects to focus more on industrial, automotive and IoT end markets.
Top Line in Detail
In Terms of Business Unit: Cypress reports in two organized segments, namely Microcontroller and Connectivity Division (“MCD”), and Memory Products Division (“MPD”).
MCD: This segment generated revenues of $310.4 million (57.6% of the total revenues), down 7.8% year over year and 12.8% from the fourth quarter.
MPD: The segment generated revenues of $228.6 million (42.4% of revenues), down 8.1% sequentially and 6.9% on a year-over-year basis.
In Terms of End Market: The company operates in three high-growth markets, namely IoT, Automotive and Legacy end markets.
IoT: The company generated 28.5% of revenues from this market, down 300 basis points (bps) sequentially and 340 bps year over year, due to softness in wireless connectivity and consumer end markets, along with declines at Nintendo.
Automotive: This market generated 36.7% of its total revenues, up 120 bps from the fourth quarter and 240 bps from the year-ago period, due to declines in automotive NOR. Automotive microcontrollers and wireless connectivity revenues increased 12% and 17% year over year, respectively, as large platform wins begin to ramp.
Legacy: Cypress generated 34.8% of revenues from this market, up 180 bps sequentially but down 100 bps on a year-over-year basis, due to continued softness in industrial and enterprise customers.
Operating Details
In the first quarter, Cypress’ gross margin was 47.4%, down 40 bps sequentially but up 150 bps from the prior-year period.
Per the company, operating expenses were $170.6 million (31.6% of revenues), down 3.4% sequentially.
Operating margin was 21.1%, up 160 bps from the year-ago quarter but down 340 bps on a sequential basis.
Balance Sheet and Cash Flow
At the end of the first quarter, cash, cash equivalents and short-term investments totaled $285.1 million compared with $285.7 million in the fourth quarter. Accounts receivables were nearly $266.4 million, down from $324.3 million in the fourth quarter.
Inventory grew to $316.9 million from $292.1 million in the fourth quarter.
Cypress generated $61.2 million cash from operations, down from $142.2 million in the fourth quarter. Further, the company generated free cash flow of $50.7 million during the first quarter. CapEx was $10.5 million in the quarter.
Guidance
For second-quarter 2019, Cypress expects revenues in the range of $515-$545 million.
Non-GAAP earnings per share for the first quarter are anticipated in the range of 22-26 cents. The company anticipates non-GAAP gross margin between 47% and 47.5%.
How Have Estimates Been Moving Since Then?
Fresh estimates followed a flat path over the past two months.
VGM Scores
Currently, Cypress has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Cypress has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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Cypress (CY) Down 4.4% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Cypress Semiconductor . Shares have lost about 4.4% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Cypress due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Cypress Q1 Earnings and Revenues Surpass Estimates
Cypress Semiconductor reported first-quarter 2019 non-GAAP earnings of 27 cents per share, beating the Zacks Consensus Estimate by 3 cents. The figure was down 22.9% sequentially but flat year over year.
Revenues of $539 million surpassed the Zacks Consensus Estimate of $535 million. The figure reflects a year-over-year decline of 7.4%.
During the quarter, the company experienced softness in all end-markets served, namely automotive, legacy and IoT.
On Apr 1, Cypress closed its joint venture (JV) with SK hynix system ic, Inc. Post this move, the company expects to focus more on industrial, automotive and IoT end markets.
Top Line in Detail
In Terms of Business Unit: Cypress reports in two organized segments, namely Microcontroller and Connectivity Division (“MCD”), and Memory Products Division (“MPD”).
MCD: This segment generated revenues of $310.4 million (57.6% of the total revenues), down 7.8% year over year and 12.8% from the fourth quarter.
MPD: The segment generated revenues of $228.6 million (42.4% of revenues), down 8.1% sequentially and 6.9% on a year-over-year basis.
In Terms of End Market: The company operates in three high-growth markets, namely IoT, Automotive and Legacy end markets.
IoT: The company generated 28.5% of revenues from this market, down 300 basis points (bps) sequentially and 340 bps year over year, due to softness in wireless connectivity and consumer end markets, along with declines at Nintendo.
Automotive: This market generated 36.7% of its total revenues, up 120 bps from the fourth quarter and 240 bps from the year-ago period, due to declines in automotive NOR. Automotive microcontrollers and wireless connectivity revenues increased 12% and 17% year over year, respectively, as large platform wins begin to ramp.
Legacy: Cypress generated 34.8% of revenues from this market, up 180 bps sequentially but down 100 bps on a year-over-year basis, due to continued softness in industrial and enterprise customers.
Operating Details
In the first quarter, Cypress’ gross margin was 47.4%, down 40 bps sequentially but up 150 bps from the prior-year period.
Per the company, operating expenses were $170.6 million (31.6% of revenues), down 3.4% sequentially.
Operating margin was 21.1%, up 160 bps from the year-ago quarter but down 340 bps on a sequential basis.
Balance Sheet and Cash Flow
At the end of the first quarter, cash, cash equivalents and short-term investments totaled $285.1 million compared with $285.7 million in the fourth quarter. Accounts receivables were nearly $266.4 million, down from $324.3 million in the fourth quarter.
Inventory grew to $316.9 million from $292.1 million in the fourth quarter.
Cypress generated $61.2 million cash from operations, down from $142.2 million in the fourth quarter. Further, the company generated free cash flow of $50.7 million during the first quarter. CapEx was $10.5 million in the quarter.
Guidance
For second-quarter 2019, Cypress expects revenues in the range of $515-$545 million.
Non-GAAP earnings per share for the first quarter are anticipated in the range of 22-26 cents. The company anticipates non-GAAP gross margin between 47% and 47.5%.
How Have Estimates Been Moving Since Then?
Fresh estimates followed a flat path over the past two months.
VGM Scores
Currently, Cypress has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Cypress has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.