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Vishay's (VSH) Q2 Earnings Beat, Revenues Lag Estimates

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Vishay Intertechnology, Inc. (VSH - Free Report) delivered second-quarter 2018 adjusted earnings of 54 cents per share, which surpassed the Zacks Consensus Estimate by 6 cents. The figure also surged 50% on a year-over-year basis and 35% sequentially.

Revenues increased 18% year over year and 6.1% on a sequential basis to $761.03 million. The figure came slightly below the Zacks Consensus Estimate of $767.5 million.

Strong performance of the company in automotive and industrial markets drove year-over-year growth. Moreover, improving demand for Vishay’s products in all the regions — Americas, Europe and Asia remained positive throughout the reported quarter.

Additionally, the book-to-bill ratio of the company was 1.17 at the end of the quarter. Further, improving backlog and expanding manufacturing capacities contributed well to the company’s quarterly results.

Further, the company continued to benefit from general electrification of the vehicles, emerging 5G technology, advancements in energy infrastructure, growing demand for automotive electronic equipment and robotics.

However, shortage of supply still remains a major concern in the healthy demand market.

Vishay Intertechnology, Inc. Price, Consensus and EPS Surprise

Vishay Intertechnology, Inc. Price, Consensus and EPS Surprise | Vishay Intertechnology, Inc. Quote

Product Segments in Detail

Resistors & Inductors: This product segment generated $252 million revenues (33.1% of total revenues), up 16% year over year. The book-to-bill ratio for this product was pegged at 1.16 during the quarter. Positive contributions from the acquisition of UltraSource drove the sales of this product. Further, the product’s robust and steady performance across automotive, industrial, medical and military end markets contributed well to the acceleration of revenues from this product line.

MOSFET: This product line generated $137 million revenues (18% of total revenues) which grew 18% year over year. The book-to-bill ratio for this product stood at 0.96 at the end of the quarter. The company continued to witness strong performance of this product line in the automotive end market.

Diodes: The company yielded $183 million revenues (24% of total revenues) from this product segment, surging 15% from the year-ago quarter. Increasing need for diodes in power application drove the sales of this product line. Further, its strong momentum in the automotive and industrial sector continued to accelerate its sales. The book-to-bill ratio for this product was pegged at 1.08 during the quarter.

Optoelectronics: This product line generated $76 million revenues (9.9% of total revenues) during the reported quarter. The figure inched up 1% from the year-ago quarter. The book-to-bill ratio for this product stood at 1.2 during the quarter. The company continued to benefit from the strong position of this product in the automotive applications.

Capacitors: The company generated $112 million revenues (14.7% of total revenues) from the sale of this product line, up 17% year over year. Growing opportunities for this product in America, Europe and China aided sales growth. The book-to-bill ratio for this product was pegged at 1.59 during the quarter.

Operating Details

In the second-quarter 2018, gross margin came in at 29.9%, expanding 290 basis points (bps) on a year-over-year basis. This is attributable to rising selling prices and increasing volume. Further, strong performance of resistors & inductors, diodes and MOSFETs led to margin expansion.

Selling, general and administrative expenses were $103.9 million, which increased 17.7% year over year.

Per the company, operating margin came in at 16.2%, expanding 300 bps from the year-ago quarter. Adjusted EBITDA margin was 21.2%, rising 220 bps year over year.

Balance Sheet & Cash Flows

As of Jun 30, 2018, cash and cash equivalents were $1 billion, increasing from $839.6 million as of Mar 31, 2018. Short-term investments were $142.7 million, down from $501.2 million in the previous quarter. Inventories were $479.9 million, up 4.2% sequentially.

In the second quarter, the company repatriated $274 million of cash which was utilized for foreign and U.S. transition tax payment. Consequently, $8.7 million of cash was used in operations compared with $45.8 million of cash generated from operations in the last reported quarter.

Hence, the company’s free cash flow in the quarter came in ($48.9) million.

Guidance

For the third-quarter 2018, Vishay expects total revenues to be in the range of $755-$795 million. The Zacks Consensus Estimate for revenues is pegged at $767.5 million.

Further, the company anticipates gross margin to lie within the range of 29-30%.

Zacks Rank and Other Stocks to Consider

Vishay flaunts a Zacks Rank #1 (Strong Buy).

Some other top-ranked stocks in the broader technology sector are Adobe Systems (ADBE - Free Report) , Micron Technology (MU - Free Report) and SCIENCE APPLICATIONS INTERNATIONAL (SAIC - Free Report) . All the three stocks sport a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Adobe Systems, Micron Technology and SCIENCE APPLICATIONS is pegged at 16.2%, 8.18% and 5%, respectively.

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