Back to top

Bear of the Day: Ultratech (UTEK)

Read MoreHide Full Article
Ultratech, Inc. (UTEK) reported disappointing second quarter results on July 18 as revenue and earnings both came in below expectations. This prompted analysts to revise their estimates significantly lower for both 2013 and 2014, sending the stock to a Zacks Rank #5 (Strong Sell).

Although shares of Ultratech sold off after the report, shares are still not cheap at 24x forward earnings. Investors may want to wait for earnings momentum to turn around before establishing a long position.

Ultratech, Inc. manufactures photolithography, laser thermal processing and inspection equipment for manufacturers of semiconductor devices. The company was founded in 1979 and is headquartered in San Jose, California.

Second Quarter Results

Ultratech reported disappointing second quarter results on July 18. Earnings per share came in at 3 cents, missing the Zacks Consensus Estimate of 4 cents. It was a significant decline from 41 cents earned in the same quarter last quarter.

Revenue came in below expectations too. Total net sales dropped 27.5% to $42.9 million, well below the consensus of $45.0 million. The gross profit margin declined from 54.2% to 47.3%.

Despite the large decline in sales, selling, general and administrative expenses rose 2.5% to $11.4 million. As a percentage of net sales, SG&A expenses jumped 775 basis points to 26.5%.

Estimates Fall

Following the Q2 earnings miss, analysts revised their estimates meaningfully lower for both 2013 and 2014. This sent the stock to a Zacks Rank #5 (Strong Sell).

The Zacks Consensus Estimate for 2013 is now $0.61, down from $1.05 before the Q2 release. The 2014 consensus is currently $1.67, down from $2.10 over the same period.

You can see this dramatic drop in the company's 'Price & Consensus' chart:

Premium Valuation

Although shares of Ultratech sold off after the earnings miss, the stock is still trading at a premium valuation on a forward P/E basis. Its 12-month forward P/E ratio of 24 is above the industry median of 22x and well above the S&P 500 at 16x.

The Bottom Line

With weak financial results, falling earnings estimates and premium valuation, investors should consider avoiding this Zacks Rank #5 (Strong Sell) stock until its earnings momentum turns around.

Todd Bunton is the Growth & Income Stock Strategist for Zacks Investment Research and Editor of the Income Plus Investor service.

Normally $25 each - click below to receive one report FREE:

More from Zacks Bear of the Day

You May Like