Please ensure Javascript is enabled for purposes of website accessibility

Why Shares of Photronics Are Down Today

By Timothy Green – May 17, 2017 at 1:15PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

A weak earnings report dragged down the stock despite the company's cautious optimism for the third quarter.

What happened

Shares of semiconductor photomask manufacturer Photronics (PLAB -1.02%) slumped on Wednesday after the company reported fiscal second-quarter results. Photronics missed analyst estimates across the board, posting a larger-than-expected revenue decline. The stock was down about 9.1% as of 1:11 p.m. EDT.

So what

Photronics reported second-quarter revenue of $108.3 million, down 12% year over year and nearly $3 million below the average analyst estimate. Integrated circuit photomasks generated $82.6 million of revenue, down 9% year over year, while flat-panel display photomasks produced $25.7 million of revenue, down 20% year over year.

40 micron posts.

Image source: Photronics.

Net income came in at $0.03 per share, down from $0.16 per share during the prior-year period and $0.02 shy of analyst expectations. Photronics CEO Peter Kirlin explained the earnings shortfall while emphasizing the progress the company made during the quarter:

Operating margin decreased mainly due to a drop in gross margin as a result of an unfavorable product mix. We were able to generate cash, building upon our already strong balance sheet. Strategically, we achieved three important milestones since our first quarter report: the first of two new writing tools is being installed to add FPD capacity; construction began on our new China IC facility; and this morning we announced a new joint venture in China.

Now what

Kirlin is "cautiously optimistic" that Photronics will achieve sales growth and margin expansion in the third quarter. He pointed to rapidly strengthening demand in the flat-panel display segment as a reason for optimism, as well as the fact that the company's facilities are running at full capacity. Photronics guided for between $110 million and $120 million of revenue for the third quarter, and EPS between $0.05 and $0.12.

Photronics operates in a cyclical industry, so ups and downs are to be expected. A solid third quarter could erase Wednesday's losses, but for now investors are punishing the stock.

Timothy Green has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Photronics Stock Quote
Photronics
PLAB
$18.46 (-1.02%) $0.19

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
351%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 11/29/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.