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Vishay (VSH) Q3 Earnings Beat Estimates, Revenues Rise Y/Y

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Vishay Intertechnology, Inc. (VSH - Free Report) reported third-quarter 2020 adjusted earnings of 25 cents per share, which beat the Zacks Consensus Estimate by 19%. The bottom line also improved 38.9% sequentially but declined 3.8% year over year.

Revenues of $640.2 million surpassed the Zacks Consensus Estimate of $610 million. Further, the top line was up 1.9% from the year-ago quarter and 10% from the prior quarter.

Top-line growth was driven by strong performances of inductors, MOSFET and opto product lines during the reported quarter. Further, recovery in the automotive sector and a strong momentum across the medical and military markets remained positives. Also, recovery in the Asian markets especially China during the reported quarter was a tailwind.

However, coronavirus-induced disruptions persisted a major overhang. Moreover, sluggishness in avionics space and weak smartphone sales were concerns.

Notably, Vishay’s book-to-bill ratio was 0.99 at the end of the third quarter.

The stock has lost 20.2% in the past year against the industry’s growth of 18.2%.



Coronavirus pandemic-induced uncertainty and economic volatility globally remain major downsides in the near term.

Nevertheless, the company’s continued focus on expanding its manufacturing capacities is a key catalyst. Moreover, growth opportunities across all the product segments remain a positive.

All these factors are likely to instill investor optimism on the stock.

Product Segments in Detail

Resistors: This product segment generated revenues of $145 million (22.6% of total revenues), down 7% year over year. This was primarily owing to coronavirus-led softness in the automotive market. Notably, the book-to-bill ratio for this product linewas 1.06 in the reported quarter.

Nevertheless, a strong momentum of resistors across industrial, military and medical markets was a positive.

Inductors: This product line generated revenues of $79 million (12.3% of total revenues), which increased 7% on a year-over year basis. The book-to-bill ratio for this product was 0.96 at the end of the reported quarter. The company’s well-performing magnetics continued to drive its specialty business.

MOSFET: This product line generated revenues of $134 million (21% of total revenues), improving 5% year over year. The book-to-bill ratio for this product was 0.93 at the end of the reported quarter.

Capacitors: This product line generated revenues of $93 million (14.5% of total revenues), down 7% year over year. The book-to-bill ratio for this product was 0.95 in the reported quarter. Disruption in the general market conditions due to coronavirus pandemic remained a woe.

However, this product line witnessed a solid momentum across America and Europe. Further, growing opportunities for capacitors in the areas of power transmission and electro cars remain tailwinds. Additionally, the growing momentum of this particular product line across the military market and grid expansion opportunities in China were positives.

Diodes: The segment generated revenues of $124 million (19.4% of total revenues), down 1% from the year-ago quarter. This can primarily be attributed to a high level of inventory in the supply chain. Further, hurdles in starting the new Taiwanese plant and increasing pricing pressure were headwinds. Notably, the book-to-bill ratio for this product was 1.05 during the quarter under review.

Optoelectronics: This product line generated revenues of $65 million (10.2% of total revenues) during the reported quarter. The figure was up25% from the year-ago quarter. The book-to-bill ratio for this product was 0.97inthe period.

Operating Details

In third-quarter 2020, gross margin was 23.7%, contracting 20 basis points (bps) on a year-over-year basis.

Selling, general and administrative expenses were $90.2 million, declining 1.7% year over year. However, as a percentage of total revenues, the figure contracted 50 bps from the year-ago quarter to 14.1%.

Consequently, operating margin expanded 150 bps on a year-over-year basis to 9.6%.

Balance Sheet & Cash Flows

As of Oct 3, 2020, cash and cash equivalents were $682.4 million, up from $599.9 million as of Jul 4, 2020. Short-term investments were $29.5 million, down from $157.2 million in the previous quarter. Inventories were $440.2 million, down from $449.2 million in the prior quarter.

Long-term debt was $392.3 million at the end of the third quarter compared with $438.5 million at the end of the second quarter.

In the third quarter, the company generated $64.3 million of cash from operations, down from $90.4 million in the previous quarter.

The company’s free cash flow in the reported quarter was $42.4 million, declining from $66.1 million in the prior quarter.

Guidance

For fourth-quarter 2020, Vishay expects total revenues in the range of $620-$660 million. The Zacks Consensus Estimate for the same is pegged at $573.25 million.

Further, the company anticipates the third-quarter gross margin to be 23.9% with +/-70 bps.

Zacks Rank & Other Key Picks

Vishay currently carries a Zacks Rank #2 (Buy). Some other top-ranked stocks in the broader technology sector are Qorvo (QRVO - Free Report) , Marchex (MCHX - Free Report) and NVIDIA Corporation (NVDA - Free Report) , each carrying the same Zacks Rank as Vishay at present. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Long-term earnings growth rate of Qorvo, Marchex and NVIDIA is pegged at 12.35%, 15% and 20.07%, respectively.

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