Cree Earnings Preview

Investors braced for a bumpy ride ahead of Cree's (Nasdaq: CREE  ) earnings announcement as the company has wavered between beating and falling short of analyst predictions during the past fiscal year. The company will unveil its latest earnings on Tuesday. Cree develops and manufactures semiconductor materials and devices mainly based on silicon carbide, gallium nitride, and related compounds.

What analysts say:

  • Buy, sell, or hold?: Analysts are bullish on this stock with 18 analysts rating it as a buy and only three rating it as a sell. Analysts don't like Cree as much as competitor Fairchild Semiconductor International overall. Wall Street has warmed to the stock over the past three months, with analysts increasing their endorsement from hold to moderate buy.
  • Revenue forecasts: On average, analysts predict $310.2 million in revenue this quarter. That would represent a rise of 20.7% from the year-ago quarter.
  • Wall Street earnings expectations: The average analyst estimate is earnings of $0.18 per share. Estimates range from $0.13 to $0.20.

What our community says:
CAPS All-Stars are solidly backing the stock with 93.4% assigning it an outperform rating. The community at large agrees with the All-Stars with 92.6% granting it a rating of outperform. Fools are gung-ho about Cree and haven't been shy with their opinions lately, logging 530 posts in the past 30 days. Despite the majority sentiment in favor of Cree, the stock has a middling CAPS rating of three out of five stars.

Management:
Cree's income has fallen year over year by an average of 37.7% over the past five quarters. A year-over-year revenue increase last quarter snaps a streak of two consecutive quarters of revenue declines. Revenue rose 0.2% in the first quarter and fell 8.2% in the fourth quarter of the last fiscal year and 6.4% in the third quarter of the last fiscal year.

Now let's look at how efficient management is at running the business. Traditionally, margins represent the efficiency with which companies capture portions of sales dollars. The following table shows gross, operating, and net margins over the past four quarters.

Quarter

Q1

Q4

Q3

Q2

Gross Margin

36.4%

38.1%

41.7%

47.1%

Operating Margin

5.0%

8.3%

9.0%

21.6%

Net Margin

4.8%

8.2%

8.6%

19.4%

One final thing: If you want to keep tabs on Cree movements, and for more analysis on the company, make sure you add it to your watchlist.

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Earnings estimates provided by Zacks.

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