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Why Is Vishay (VSH) Down 8.9% Since Last Earnings Report?

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It has been about a month since the last earnings report for Vishay Intertechnology (VSH - Free Report) . Shares have lost about 8.9% 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 Q2 Earnings & Revenues Up Y/Y

Vishay Intertechnology reported second-quarter 2021 adjusted earnings of 61 cents per share, which beat the Zacks Consensus Estimate by 3.4%. Further, the bottom line improved 32.6% sequentially and 238.9% year over year.

Revenues of $819.1 million lagged the Zacks Consensus Estimate of $820.8 million. Notably, the top line was up 40.8% from the year-ago quarter and 7.1% from the prior quarter.

Strong momentum across resistor, inductor, diode, MOSFET, capacitor and opto product lines drove top-line growth in the reported quarter. Strengthening position in Asia and the Americas was another tailwind.

However, softness in Europe remained a concern in the reported quarter.

Notably, Vishay’s book-to-bill ratio was 1.38 at the end of the second 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 $195 million (24.4% of total revenues), up 32% year over year. The strong momentum of resistors across automotive, industrial, military and medical markets was a positive. Notably, the book-to-bill ratio for the product line was 1.39 in the reported quarter.

Inductors: The product line generated revenues of $86 million (11% of total revenues), which increased 29% 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 1.21 at the end of the reported quarter.

MOSFET: The product line generated revenues of $168 million (20% of total revenues), improving 39% year over year. The book-to-bill ratio for the product line was 1.26 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 $120 million (13.9% of total revenues), up 36% year over year. The book-to-bill ratio for the product line was 1.37 in the reported quarter. The product line witnessed a solid momentum across America and Europe. Growing opportunities for capacitors in the areas of power transmission and electro cars remain tailwinds.

Diodes: The segment generated revenues of $175 million (20.5% of total revenues), up 36% 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 1.45 in the quarter under review.

Optoelectronics: The product line generated revenues of $76 million (10.2% of the total revenues) in the reported quarter. The figure was up 47% from the year-ago quarter. The book-to-bill ratio for the product line was 1.69 for the period.

Operating Details

In second-quarter 2021, gross margin was 28%, expanding 550 basis points (bps) on a year-over-year basis.

Selling, general and administrative expenses were $103.9 million, increasing 16.6% year over year. As a percentage of total revenues, the figure contracted 260 bps from the year-ago quarter to 12.7%.

Consequently, operating margin expanded 830 bps on a year-over-year basis to 15.3%.

Balance Sheet & Cash Flows

As of Jul 3, 2021, cash and cash equivalents were $726.8 million, up from $643.8 million as of Apr 3, 2021. Short-term investments were $129.03 million, down from $137.3 million in the previous quarter. Inventories were $507.9 million, up from $473.9 million in the prior quarter. Long-term debt was $454.03 million at the end of the second quarter compared with $453.2 million at the end of the first quarter.

In the second quarter, the company generated $117.5 million of cash from operations, up from $57.3 million in the previous quarter. The company’s free cash flow in the reported quarter was $85.3 million, increasing from $28.9 million in the prior quarter.

Guidance

For third-quarter 2021, Vishay expects total revenues of $810-$850 million. Further, the company anticipates a third-quarter gross margin of 28.3% (+/-50 bps).

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 10.83% due to these changes.

VGM Scores

Currently, Vishay has a great Growth Score of A, a grade with the same score on the momentum front. Following the exact same course, 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 this revision looks promising. Notably, Vishay has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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