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Cypress (CY) Q3 Earnings and Revenues Surpass Estimates

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Cypress Semiconductor (CY - Free Report) reported third-quarter 2019 non-GAAP earnings of 30 cents per share, beating the Zacks Consensus Estimate by a penny. The figure was up 20% sequentially but down 25% year over year.

Revenues of $574.5 million also surpassed the Zacks Consensus Estimate by 0.93%. The figure was up 7.9% sequentially but down 8.8% year over year. This reflects the adjustment for the NAND business divestiture, which was completed on Apr 1, 2019.

On Oct 16, 2019, the European Commission cleared the proposed acquisition of Cypress by Infineon Technologies. The proposed transaction previously received antitrust clearances in the Philippines and South Korea.

Cypress Semiconductor Corporation Price, Consensus and EPS Surprise

 

Top Line in Detail

In Terms of Business Unit: Cypress reports in two organized segments, namely Microcontroller and Connectivity Division, and Memory Products Division.

MCD: This segment generated revenues of $410.7 million (71% of the total revenues), down 0.6% year over year but up 16% sequentially. The sequential increase was driven by IoT growth, particularly in wireless, USB-C and PSoC product families.

MPD: The segment generated revenues of $163.8 million (29% of revenues), down 36.9% year over year and 8% on a sequential basis.

In Terms of End Market: The company operates in three high-growth markets, namely IoT, Automotive and Legacy end markets.

IoT: The company generated 42.6% of total revenues from this market, up 510 basis points (bps) sequentially and 520 bps year over year.

Automotive: This market generated 36.5% of its total revenues, down 150 bps from the second quarter and 550 bps from the year-ago period.

Legacy: Cypress generated 20.9% of revenues from this market, down 360 bps sequentially and 1070 bps on a year-over-year basis.

Operating Details

In the third quarter, Cypress’ non-GAAP gross margin was 46.9%, down 10 bps sequentially and year over year, each.

Operating expenses were $171.3 million, down 7.3% year over year.

Non-GAAP operating margin was 21.8%, down 290 bps from the year-ago quarter but up 140 bps on a sequential basis.

Balance Sheet and Cash Flow

At the end of the third quarter, cash, cash equivalents and short-term investments totaled $343 million compared with $372.2 million in the second quarter. Accounts receivables were nearly $389.9 million, up from $267.8 million in the second quarter.

Inventory went down to $327.4 million from $335.3 million in the second quarter.

Zacks Rank & Stocks to Consider

Cypress currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader technology sector include Itron, Inc. (ITRI - Free Report) , Booking Holdings Inc. (BKNG - Free Report) and Ambarella, Inc. (AMBA - Free Report) . While Itron sports a Zacks Rank #1 (Strong Buy), Booking Holdings and Ambarella carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth for Itron, Booking Holdings and Ambarella is currently projected at 25%, 13.08% and 11.18%, respectively.

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