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Why Is Vishay (VSH) Down 1.1% Since Last Earnings Report?

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A month has gone by since the last earnings report for Vishay Intertechnology (VSH - Free Report) . Shares have lost about 1.1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Vishay due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Vishay's Q1 Earnings & Revenues Up Y/Y

Vishay Intertechnology reported first-quarter 2021 adjusted earnings of 46 cents per share, which beat the Zacks Consensus Estimate by 2.2%. Further, the bottom line improved 64.3% sequentially and 119% year over year.

Revenues of $764.6 million lagged the Zacks Consensus Estimate of $765 million. Notably, the top line was up 24.8% from the year-ago quarter and 14.6% from the prior quarter.

Strong momentum across resistor, inductor, diode, MOSFET, capacitor and opto product lines drove top-line growth in the reported quarter. Further, strengthening position in the automotive sector’s Asia markets, especially China, was a tailwind.

Notably, Vishay’s book-to-bill ratio was 1.67 at the end of the first quarter.

The company’s continued focus on expanding its manufacturing capacities is a key catalyst. Further, growth prospects related to factory automation, electrical vehicles, and 5G infrastructure remain positives for the company.

Product Segments in Detail

Resistors: The segment generated revenues of $187 million (24.4% of total revenues), up 12% year over year. The strong momentum of resistors acrossautomotive, industrialand medical markets was a positive. Notably, the book-to-bill ratio for the product line was 1.50 in the reported quarter.

Inductors: The product line generated revenues of $84 million (11% of total revenues), which increased 12% on a year-over-year basis. This was primarily attributed to the company’s well-performing magnetics,which continued to drive its specialty business.The book-to-bill ratio for the product line was 1.13 at the end of the reported quarter.

MOSFET: The product line generated revenues of $153 million (20% of total revenues), improving 29% year over year. The book-to-bill ratio for the product line was 1.97 at the end of the reported quarter. Growing momentum across the automotive space and solid demand environment contributed well.

Capacitors: The product line generated revenues of $106 million (13.9% of total revenues), up 9% year over year. The book-to-bill ratio for the product line was 1.73 in the reported quarter. The 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.

Diodes: The segment generated revenues of $157 million (20.5% of total revenues), up 32% from the year-ago quarter. Vishay’s strong momentum across the automotive and industrial markets with diodes remained a positive. Notably, the book-to-bill ratio for the product line was 1.85inthe quarter under review.

Optoelectronics: The product line generated revenues of $78 million (10.2% of total revenues) inthe reported quarter. The figure was up 37% from the year-ago quarter. The book-to-bill ratio for the product line was 1.66 inthe period. Strengthening demand environment for the product line contributed well.

Operating Details

In first-quarter 2021, gross margin was 26.5%, expanding 250 basis points (bps) on a year-over-year basis.

Selling, general and administrative expenses were $105.7 million, increasing5.9% year over year. As a percentage of total revenues, the figure contracted 250 bps from the year-ago quarter to 13.8%.

Consequently, operating margin expanded 500 bps on a year-over-year basis to 12.7%.

Balance Sheet & Cash Flows

As of Apr 3, 2021, cash and cash equivalents were $643.8 million, up from $619.9millionas of Dec 31, 2020. Short-term investments were $137.3 million, down from $158.5 million in the previous quarter. Inventories were $473.9 million, up from $448.3 million in the prior quarter.

Long-term debt was $453.2 million at the end of the first quarter compared with $394.9 million at the end of the fourth quarter.

In the first quarter, the company generated $57.3 million of cash from operations, down from $125.7 million in the previous quarter.

The company’s free cash flow in the reported quarter was $28.9 million, declining from $73.01 million in the prior quarter.

Guidance

For second-quarter 2021, Vishay expects total revenues of $790-$830 million.

Further, the company anticipates second-quarter gross margin to be 27.3%, with +/-60 bps.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted 9.43% due to these changes.

VGM Scores

At this time, Vishay has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Vishay has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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