PLAB Photronics Inc

Photronics Inc. (PLAB) reported weaker year-over-year results for the second quarter of fiscal 2014 (ended May 4, 2014). Adjusted earnings came in at 2 cents per share, down roughly 75.0% from 8 cents per share in the year-ago quarter. The decline was due to reduced revenues and margins. Moreover, earnings missed the Zacks Consensus Estimate of 4 cents per share by 50.0%.

On a GAAP-basis, Photronics recorded earnings of 22 cents per share, up 175.0% from the year-ago quarter. The growth in earnings was due to the inclusion of acquisition gains along with transaction expenses associated with the joint venture, PDMC in Taiwan.

Revenues: Revenues fell 1.7% year over year to $104.9 million, slightly ahead of the Zacks Consensus Estimate of $104.0 million. Revenues from the semiconductor photomasks were $76.6 million, representing 73% of total revenues, while revenues from flat panel display (FPD) photomasks came in at $28.3 million, accounting for 27% of total revenue.

Costs/Margins: Photronics’ cost of sales increased marginally year over year to $82.7 million, representing 78.8% of total revenue.

Selling, general and administrative expenses, as a percentage of revenues, increased 140 basis points (bps) year over year to 12.8%, while research and development expenses rose 139 bps to 5.7% of total revenue. Operating profit dropped 65.0% year over year to $2.8 million, against $8.1 million recorded in the prior-year quarter.

Balance Sheet: Photronics had cash and cash equivalents balance of approximately $191.8 million at the end of fiscal second-quarter 2014 versus $189.2 million in the preceding quarter. Long-term borrowings were $158.7 million compared with $161.1 million at the end of fiscal first-quarter 2014.

Outlook: The company is optimistic about recording higher revenues in the coming quarters on the back of the recently formed joint venture PDMC in Taiwan. With this, Photronics is hopeful of promoting an efficient photomask delivery in the region.

Other Stocks to Consider

Photronics currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks worth considering in the industry include Kulicke and Soffa Industries, Inc. (KLIC), Cohu, Inc. (COHU) and Ultratech, Inc. (UTEK). While Kulicke and Soffa Industries sports a Zacks Rank #1 (Strong Buy), Cohu and Ultratech have a Zacks Rank #2 (Buy).

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