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Infineon (IFNNY) Q4 Earnings Lag Estimates, Revenues Up Y/Y

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Infineon Technologies AG (IFNNY - Free Report) reported fourth-quarter fiscal 2019 adjusted earnings of €0.19 per share (or approximately 21 cents per share), lagging the Zacks Consensus Estimate pegged by 4.55%. Moreover, the figure declined 32% from the year-ago quarter.
 
Revenues improved 1% year over year to €2,062 billion (or $2.292 billion) in the reported quarter. Strength in Automotive (ATV) business segment aided the top line.

Segmental Highlights

ATV accounted for 43% of total revenues, improving 3% year over year to €893 million. The segment witnessed robust adoption of advanced driver assistance systems (ADAS). However, demand for electric drive train devices declined during the reported quarter.

Industrial Power Control or IPC represented 18% of total revenues, remaining flat year over year at €362 million. Sturdy adoption of products utilized in wind power plants, and photovoltaic devices benefited the segment while lower demand for industrial drives affected results.

Power Management & Multimarket or PMM contributed 31% to total revenues, declining 2% on a year-over-year basis to €639 million. Management noted sequential decline in demand for AC-DC applications. However, higher adoption of DC-DC power supplies, strong US dollar and seasonality in products utilized in smartphones limited the decline.
 

Infineon Technologies AG Price, Consensus and EPS Surprise

 

Infineon Technologies AG Price, Consensus and EPS Surprise

Infineon Technologies AG price-consensus-eps-surprise-chart | Infineon Technologies AG Quote

Digital Security Solutions or DSS segment revenues contributed 8% to total revenues, declining 1% from the year-ago figure to €162 million. Improving demand in payment systems, authentication, access control and ticketing failed to offset the weakness in government ID applications.

Revenue Break-up by Geography

Region-wise, Europe, Middle East, Africa revenues were flat on a year-over-year basis to €611 million (30% of total revenues). Specifically, Germany contributed €296 million, up 1% from the year-ago quarter.

Revenues from Asia-Pacific (excluding Japan and Greater China) declined 7.1% on a year-over-year basis to €289 million (14% of total revenues).

Revenues from Greater China improved 2.6% to €748 million, representing 36% of total revenues. China, in particular contributed €585 million to Greater China revenues, climbing 9.3% from the year-ago quarter.

Revenues from Japan increased 1.4% from the year-ago quarter to €147 million (7% of total revenues).

Revenues from Americas improved 6.4% from the year-ago quarter to €267 million (13% of total revenues). Specifically, the United States contributed €217 million, up 5.3% from the year-ago quarter.

Operating Details

Adjusted gross margin contracted 430 bps from the year-ago quarter to 36.3%. Segment result declined 22% from the year-ago quarter to €311 million. Segment result margin contracted 440 bps on a year-over-year basis to 15.1%.

Segment-wise, ATV, IPC, PMM and DSS margins contracted 590 bps, 390 bps, 390 bps and 110 bps to 8.7%, 16.3%, 23.9% and 13.6%, respectively, on a year-over-year basis.

Research & Development (R&D) expenses as a percentage of revenues expanded 30 bps to 11.2%, while Selling, General & Administrative (SG&A) expenses contracted 30 bps to 10.8% on a year-over-year basis.

Operating income came in at €246 million, declining 33.5% from the year-ago quarter. Operating margin (operating income as a percentage of revenues) contracted 620 bps year over year to 11.9%.

Balance Sheet & Cash Flow

Infineon ended the fiscal fourth quarter with €1.021 billion in cash & cash equivalents, down from €722 million reported in the previous quarter.

Total debt (including short-term portion) as on Sep 30, 2019, was €1.556 billion, up from €1.535 billion reported at the end of the previous quarter.

Infineon generated €682 million as cash from operations compared with the previous quarter’s figure of €396 million.

Free cash flow in the reported quarter came in at €334 million, compared with €63 million at the end of the prior quarter.

Fiscal 2019 at a Glance

Infineon reported fiscal 2019 revenues of €8.029 billion, up 6% over fiscal 2018 tally.

Segment result declined 2.5% year over year to €1.319 billion. Segment result margin contracted 140 bps on a year-over-year basis to 16.4%.

Guidance

First-quarter fiscal 2020 revenues are anticipated to decline 7% (+/- 2%) on a sequential basis. Segment margin is anticipated to be 13%.

For fiscal 2019, management anticipates revenues to grow 5% (+/- 2%) year over year. Segment result margin is projected to be 16%.

Management anticipates investments to come in at €1.3 billion in fiscal 2020. The planned investments include costs pertaining to the company’s efforts on the new chip production of 300-millimeter (mm) wafer at Villach, Austria.

Zacks Rank & Stocks to Consider

Infineon currently carries a Zacks Rank #5 (Strong Sell).

Some better-ranked stocks in the broader technology sector worth considering are Alteryx, Inc. (AYX - Free Report) , Instructure, Inc. (INST - Free Report) and Fortinet, Inc. (FTNT - Free Report) . All the three stocks flaunt a Zacks Rank #1 (Strong buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Alteryx, Instructure and Fortinet is currently pegged at 39.85%, 30% and 14%, respectively.

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