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Bull of the Day

Investors tend to be weary of companies that experience the combined impacts of an abrupt departure by a key member of the management team, and a shift in the company’s overall focus.  But there are times when that is just what the company needed.  This is the case of the Zacks Bull of the Day, Ultra Clean Holdings (UCTT - Free Report) who in July saw their CFO leave the company during a time when management began to refocus on growing their market share and new semicap opportunities.

This Zacks Rank #1 (Strong Buy) company is a developer and supplier of critical subsystems for the semiconductor capital equipment, flat panel, solar and medical device industries. Ultra Clean offers its customers an integrated outsourced solution for gas delivery systems and other subassemblies, improved design-to-delivery cycle times, component neutral design and manufacturing and component testing capabilities. Ultra Clean's customers are primarily original equipment manufacturers for the semiconductor capital equipment, flat panel, solar and medical device industries. Ultra Clean is headquartered in Menlo Park, California.

Recent Earnings Data

Management announced Q3 earnings on October 26th where they easily beat both the Zacks consensus earnings and revenue estimates.  Specifically, on a year over year basis, the company saw gains in Total revenues +19%, Semiconductor revenues +14.6%, Total revenues outside the U.S. +66.1%, Net income +52.9%, Gross margins +0.7%, and Net cash increased by $3.2 million.  

Management’s Take

According to Jim Scholhamer, President and CEO, “Strong momentum led to record revenues and significant improvement on the bottom line this quarter. As a result of our strategic focus on the semiconductor capital equipment market, we are expanding our capabilities to cost-effectively meet customers' dynamic needs. As the market continues its upward trajectory, our solid customer relationships and growing market position are enabling us to outpace the broader industry.”

Price and Consensus Chart

As you can see below, the company’s stock price and future earnings estimates have been steadily climbing for the majority of 2016.

ULTRA CLEAN HLD Price and Consensus

ULTRA CLEAN HLD Price and Consensus | ULTRA CLEAN HLD Quote

Increasing Estimates

Due to the positive earnings report and improved future outlook, earnings estimates for Q4 16, Q1 17, FY 16 and FY 17 have all seen significant improvements over the past 7 days.  Q4 16 doubled from $0.09 to $0.18, Q1 17 jumped up from $0.10 to $0.15, FY 16 improved from $0.31 to $0.46, and FY 17 leaped up from $0.53 to $0.68.

Bottom Line

Management’s shift in focus has enabled them to improve their market share, and exploit several spending cycles.  Further, management expects to grow both organically, and inorganically by improving their relationships with their two largest customers, Applied Materials, and Lam Research, and improving their new process technologies.

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