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Why Is Vishay (VSH) Down 4.9% 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 4.9% 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 Intertechnology Beats Earnings Estimates in Q4

Vishay Intertechnology delivered fourth-quarter 2018 adjusted earnings of 58 cents per share, which surpassed the Zacks Consensus Estimate by 7 cents. The figure surged 56.7% year over year but declined 3.3% sequentially.

Revenues increased 15.2% on a year-over-year basis but decreased 0.6% on a sequential basis to $775.9 million. Notably, the figure came ahead of the Zacks Consensus Estimate of $761 million.

The company’s strong performance in automotive and industrial markets drove year-over-year growth. Moreover, strengthening manufacturing capacities of the company contributed well.

Further, increasing demand in almost all markets and solid momentum across all regions was a major positive.

Additionally, the book-to-bill ratio of the company was 0.94 at the end of the reported quarter.

Although supply has started to catch up with demand, supply shortage still remains a major concern in the healthy demand market. Further, imposition of U.S. tariffs is negatively impacting the company’s performance in the Chinese industrial market.

Product Segments in Detail

Resistors & Inductors: This product segment generated $262 million revenues (33.8% of total revenues), up 23% year over year. The product’s robust performance across automotive, industrial, medical and military end markets continued to accelerate revenues from this product line. Moreover, positive contributions from the acquisition of UltraSource drove the sales of this product. The book-to-bill ratio for this product is at 0.94 in the reported quarter.

MOSFET: This product line generated $139 million revenues (18% of total revenues), advancing 15% year over year. The book-to-bill ratio for this product stood at 1.08 at the end of the reported quarter. The company witnessed sustained performance of this product line in the automotive end market. Further, robust MOSFET transistors continued to aid the company’s market position. Additionally, expanding internal and foundry capacities for MOSFETs are tailwinds.

Capacitors: The company generated $131 million revenues (16.9% of total revenues) from the sale of this product line, up 26% year over year. Continued solid momentum with this product line in America and Europe remained positive throughout the quarter under review. Further, growing opportunities for capacitors in China in the areas of power transmission and electro cars are tailwinds. The book-to-bill ratio for this product stood at 1.02 in the reported quarter.

Diodes: The company yielded $177 million revenues (22.8% of total revenues) from this product segment, surging 12% from the year-ago quarter. The strong momentum of this product in the automotive and industrial sector continued to accelerate its sales. The book-to-bill ratio for this product stood at 0.83 during the quarter under review.

Optoelectronics: This product line generated $66 million revenues (8.5% of total revenues) during the reported quarter. The figure was down 4.5% from the year-ago quarter. The book-to-bill ratio for this product stood at 0.75 during the fourth quarter. Weakness in the Chinese consumer market remained an overhang for these products.

Operating Details

In fourth-quarter 2018, gross margin came in at 28.3%, expanding 200 basis points (bps) on a year-over-year basis.

Selling, general and administrative expenses were $100.02 million, increasing 4.9% year over year. However, as a percentage of total revenues, the figure contracted 120 bps from the year-ago quarter.

Per the company, operating margin came in at 15.4%, expanding 410 bps from the year-ago quarter. Adjusted EBITDA margin was 20.1%, expanding 240 bps year over year.

Balance Sheet & Cash Flows

As of Dec 31, 2018, cash and cash equivalents were $686.03 million, declining from $928.1 million as of Sep 29, 2018. Short-term investments were $78.3 million, down from $135 million in the previous quarter. Inventories were $479.7 million, declining from $500.3 million in the previous quarter.

In the fourth quarter, the company generated $150 million of cash from operations, up from $70.7 million in the previous quarter.

The company’s free cash flow in the fourth quarter came in $93.2 million, significantly up from $21.05 million in the third quarter.

Guidance

For first-quarter 2019, Vishay Intertechnology expects total revenues to be in the range of $730 million to $770 million.

Further, the company anticipates gross margin to lie between the range of 28% and 29%.

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 6.38% due to these changes.

VGM Scores

Currently, Vishay has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. 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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