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Fujifilm: A Balanced View

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We issued an updated research report on Fujifilm Holdings Corporation (FUJIY - Free Report) on May 27, 2014. The company reported mixed results for the fiscal fourth quarter of 2014 (ended Mar 31, 2014). Earnings per ADR (American Depositary Receipt) dropped 27% year over year to 37 cents, while revenues increased 10% year over year to ¥665.6 billion ($6,473.1 million). The rise was attributable to strong sales in the medical systems business, graphic systems business, documents business and favorable effects of yen depreciation.

The medical systems business is expected to register a double-digit year-over-year sales growth in fiscal 2015. Additionally, the company is optimistic of registering a rise in the sales of its subsidiaries Toyama Chemical and Fujifilm Pharma. Moreover, yen exchange rate is expected to remain low in fiscal 2015, which will boost revenues.

Fujifilm has been attempting to increase shareholders value over the past quarters. In fiscal 2014, the company paid an ordinary dividend of ¥20.00 per ADR, while another ¥20.00 of ordinary dividend and ¥10.00 per ADR of special dividend are expected to be disbursed for fiscal 2014.

However, Fujifilm has been exposed to international socio-political risks due to its overseas operations. Moreover, the company is affected by the ever-increasing prices of raw materials, hurting margins.

Fujifilm’s diversified product portfolio exposes it to stiff competition from different players for various products. Thus, it becomes difficult for the company to manage its prices while checking costs. Also, the traditional photo imaging business of the company is expected to decline because of competition from smartphones and camera-equipped cellphones.

With a market capitalization of $12.8 billion, Fujifilm currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks worth considering in the industry include Cohu, Inc. (COHU - Free Report) , Kulicke and Soffa Industries, Inc. (KLIC - Free Report) and Ultratech, Inc. . While Cohu and Kulicke and Soffa Industries sport a Zacks Rank #1 (Strong Buy), Ultratech has a Zacks Rank #2 (Buy).

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