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Cypress (CY) Q4 Earnings In Line With Estimates, Sales Lag

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Cypress Semiconductor reported fourth-quarter 2019 non-GAAP earnings of 28 cents per share, in line with the Zacks Consensus Estimate. The figure was down 6.7% sequentially and 20% year over year.

Revenues of $559.6 million missed the Zacks Consensus Estimate by 0.6%. Also, the figure was down 2.6% sequentially and 7.4% year over year. This reflects the adjustment for the NAND business divestiture, which was completed on Apr 1, 2019.

The European Commission had previously cleared the proposed acquisition of Cypress by Infineon Technologies. The proposed transaction received antitrust clearances in the United States, the European Union, Philippines, Taiwan, South Korea and Japan. However, approval from the Committee on Foreign Investment in the United States (CFIUS) and China’s State Administration for Market Regulation (SAMR) is still required.

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 $401.3 million (72% of the total revenues), up 12.8% year over year but down 2.3% sequentially.

MPD: The segment generated revenues of $158.3 million (28% of revenues), down 36.4% year over year and 3.4% 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 40% of total revenues from this market, down 60 basis points (bps) sequentially but up 850 bps year over year.

Automotive: This market generated 39.3% of total revenues, up 280 bps from the third quarter and 380 bps from the year-ago period.

Legacy: Cypress generated 20.7% of revenues from this market, down 20 bps sequentially and 1230 bps on a year-over-year basis.

Operating Details

In the fourth quarter, Cypress’ non-GAAP gross margin was 47.1%, up 20 bps sequentially but down 70 bps year over year.

Operating expenses were $179.7 million, down 19.2% year over year.

Non-GAAP operating margin was 21.1%, down 70 bps on a sequential basis and 340 bps from the year-ago quarter.

Balance Sheet and Cash Flow

At the end of the fourth quarter, cash, cash equivalents and short-term investments totaled $415.5 million compared with $343 million in the third quarter. Accounts receivables were nearly $301.8 million, down from $389.9 million in the third quarter.

Inventory declined to $297.9 million from $327.4 million in the third 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) , Splunk Inc. (SPLK - Free Report) and Waters Corporation (WAT - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term earnings growth for Itron, Splunk, and Waters Corp is currently projected at 25%, 31.2% and 9.5%, respectively.

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