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Cree (CREE) Set to Report Q4 Earnings: What's in the Offing?

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Cree, Inc. (CREE - Free Report) is slated to report fourth-quarter fiscal 2020 earnings results on Aug 18.

For fourth-quarter fiscal 2020, non-GAAP loss is projected in the range of 15-23 cents per share. The Zacks Consensus Estimate for bottom line is pegged at a loss of 28 cents, compared with earnings of 11 cents reported in the year-ago quarter. Notably, the consensus has remained unchanged for the past 30 days.

Cree expects revenues in the range of $185-$215 million. The Zacks Consensus Estimate is pegged at $198.8 million, suggesting a decline of 20.9% on a year-over-year basis.

Factors to Note

Cree’s Wolfspeed business’ fiscal fourth-quarter performance is likely to reflect the impact of coronavirus outbreak-induced lower factory utilization. The company projects Wolfspeed revenues in the range of $100-$115 million. The Zacks Consensus Estimate for Wolfspeed revenues is pegged at $105 million, suggesting decline of 21.8% from year-ago reported figure.

However, the company might have gained from momentum in Wolfspeed business, primarily driven by uptick in silicon carbide (or SiC) solutions. Robust adoption of the company’s SiC and Power solutions, mainly by automakers to accelerate deployment of electric vehicles (EVs), remains noteworthy.

During the quarter under review, Cree announced that China-based commercial vehicles manufacturer, Zhengzhou Yutong Group, has selected the Cree 1200V silicon carbide devices for a StarPower power module for its new powertrain system for electric buses.

The company’s expertise in SiC technology and expanding clientele despite coronavirus-induced business headwinds is instilling confidence in the stock. Shares of Cree have returned 56.8% year to date, compared with the industry’s growth of 29.2%.



Moreover, incremental adoption of latest Wolfspeed 650V silicon carbide MOSFETs, aimed at accelerating industrial applications and boost power density, may get reflected in the fiscal fourth-quarter revenues.

Further, solid demand for IoT and 5G infrastructure devices, and robust adoption of SiC and GaN materials is expected to have driven the company's performance in the industrial market.

Meanwhile, LED Products revenues are projected in the range of $85-$100 million. LED Products revenues are anticipated to be affected by the coronavirus outbreak-led supply constraints. The Zacks Consensus Estimate for LED products revenues is pegged at $90 million, indicating year-over-year decline of 23.1%.

Moreover, increasing investment on development of SiC fabrication facility to deal with stiff competition, from peers like Analog Devices (ADI - Free Report) , is likely to have weighed on the to-be-reported quarter’s profitability.

What the Zacks Model Unveils

Our proven model does not predict an earnings beat for Cree this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat.
 

Cree, Inc. Price and EPS Surprise

Cree, Inc. Price and EPS Surprise

Cree, Inc. price-eps-surprise | Cree, Inc. Quote

Cree has an Earnings ESP of 0.00% and a Zacks Rank #3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks that Warrant a Look

Here are a couple of other companies, which have the right combination of elements to post an earnings beat this quarter:

Deere & Company (DE - Free Report) has an Earnings ESP of +18.05% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Agilent Technologies, Inc. (A - Free Report) has an Earnings ESP of +5.00% and a Zacks Rank #2.

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