Tower Beats on Earnings, View Upbeat - Analyst Blog
May 10 2013 - 4:30AM
Zacks
Tower Semiconductor
Ltd. (TSEM) reported first-quarter 2013 earnings per share
of 12 cents, beating the Zacks Consensus Estimate of 16 cents loss
per share.
Management also provided an upbeat view for the overall
semiconductor market. Following the earnings release, shares shot
up 2.13% but dropped 5.82% in after-hours trading.
Revenues
The company reported revenues of $112.6 million, down 33.0% year
over year and 23.7% sequentially. The decrease was due to planned
contraction in supply agreement with Micron Technology.
Margins
Reported gross margin for the quarter was 2.3%, down 1,120 basis
points (bps) year over year due to lower volumes.
Operating expenses (R&D and MG&A) of $19.5 million were
down 4.9% from $20.5 million in the year-ago quarter. Reported
operating margin was (16.7%), down significantly from the year-ago
quarter margin of 1.3%. Research and development (R&D) expenses
as well as marketing, general and administrative (MG&A)
expenses increased as a percentage of sales.
The quarter’s GAAP net loss was $23.2 million or loss per share of
96 cents versus $19.3 million or 91 cents loss per share in the
comparable quarter last year. Excluding special items but including
stock-based compensation expense, non-GAAP net income was $5.8
million or earnings per share of 12 cents.
Balance Sheet
The company ended the first quarter with cash, short-term deposits
and designated deposits balance of $119.7 million, down from $133.4
million in the prior quarter. Trade receivables were $80.0 million,
up from $79.4 million in the prior quarter.
During the quarter, cash flow from operations was $18 million and
capex was $26 million. Additionally, Tower reduced its 2013 and
2014 principal payments from $105 million to $30 million.
This loan of $131 million carries a low interest of LIBOR+3.5% with
final maturity in May 2016.
Guidance
For the second quarter of 2013, Tower expects total revenue in the
range of $122 to $132 million, up 13% sequentially at the midpoint.
Conclusion
Israel-based Tower Semiconductor is a global specialty foundry
leader, which manufactures semiconductors using its advanced
production processes. The company reported a decent first quarter
with earnings exceeding the Zacks Consensus Estimate by a wide
margin.
We remain encouraged by the company’s record number of full mask
tape-outs into Tower’s 8" facilities and strong demand in the
Israeli 6" factory. Management also gave a strong second quarter
guidance, which indicates improving demand visibility and an
overall improving semiconductor market.
Additionally, we believe that the company’s new products, design
win activity, strong customer acceptance and global market
expansion, including Europe, Korea and the U.S will continue to
drive Tower’s growth.
Currently, Tower has a Zacks Rank #3 (Hold). Other stocks that have
been performing well and are worth considering include
Amkor Tech (AMKR), Integrated Device
Tech (IDTI) and Pericom Semiconductor
(PSEM), all carrying a Zacks Rank #1 (Strong Buy).
AMKOR TECH INC (AMKR): Get Free Report
INTEGR DEVICE (IDTI): Free Stock Analysis Report
PERICOM SEMICON (PSEM): Free Stock Analysis Report
TOWER SEMICOND (TSEM): Get Free Report
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