IRF Surpasses Estimates

International Rectifier Corporation (IRF - Snapshot Report) reported second quarter 2011 diluted earnings per share of 62 cents moving way ahead of the Zacks Consensus Estimate of 49 cents per share. This also compares favorably with a sequential increase of 47.6% and an increase of 1650% from net loss of 4 cents from year ago quarter.

Management reasoned executing on the strategy to have delivered one of the most profitable quarters for the company in years. Strong demand in the appliance, industrial and automotive markets helped to ease off the weakness in consumer and computing markets.

Quarter That Was

IRF reported revenue of $281.7 million and was just ahead of  the Zacks Consensus Revenue Estimate of $281.0 million. Revenue increased marginally by 0.3% sequentially but surged 34.0% from prior year quarter. Among the segments Power Management Devices contributed the most with $112.6 million or 39.9% of the total revenue. Following next, Energy-Saving Products contributed $63.1 million or 22.4%.  

Gross profit increased 92.7% from same quarter last year and 11.2% sequentially to $121.0 million. Lower manufacturing costs due to higher cost absorption related with an increase in inventory in anticipation of future demand and a higher gross margin product mix led to the gross margin’s sequential increase of 430 basis points to 43%. Gross margin was also up from 29.9% in the year ago quarter.

Operating income increased 41.1% on a sequential basis to $44.6 million. Operating income contributed for 15.8% of the total revenue in the reported quarter compared with 11.3% sequentially.

IRF exited the quarter with cash, cash equivalents and marketable investments of $602.5 million and included restricted cash of $3.4 million.

During the quarter the company purchased 170,000 shares of its common stock for $4.9 million and has 69,791,968 shares outstanding.

Quarter Ahead

Management expects revenue in the following quarter to be in the range of $285-$295 million. Zacks Consensus Revenue Estimate expects the revenue to be $273 million. Gross margin is expected to be between 39%-39.5%. Management also stated that strength in appliance, industrial and automotive markets is expected to continue and the company is witnessing the early signs of recovery in computing.

Conclusion

Estimates for the quarter had been trending up in the run-up to the earnings release, though only 1 analyst gave a positive revision in the last 30 days. The full-year estimate for next year has moved up over the past month to $2.00 per share from $1.98, with 1 analyst giving a positive revision. The full-year Zacks Consensus Estimate for 2010 had increased to $1.76 from $1.73 thirty days ago.

IRF exists in the market in the face of competition from Power Integrations Inc. (POWI - Snapshot Report).

We currently have a Zacks #2 Rank for IRF which translates into a Buy rating on short term basis. On a longer term we currently have an Outperform rating.

Read the full analyst report on IRF