Please ensure Javascript is enabled for purposes of website accessibility

How Ultra Clean Holdings Inc. Shares Fell 24% Today

By Anders Bylund - Oct 26, 2017 at 12:37PM

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

The skyrocketing semiconductor equipment stock is getting a haircut today, based on a mixed earnings report.

What happened

Shares of Ultra Clean Holdings (UCTT 3.00%) fell as much as 23.9% in Thursday's morning session. The maker of manufacturing equipment for the semiconductor industry reported mixed earnings on Wednesday night, and investors were quick to fixate on Ultra Clean's earnings miss.

So what

Ultra Clean's third-quarter sales jumped 66% higher, compared to the year-ago period, to land at $243 million. On the bottom line, adjusted earnings more than tripled to $0.62 per share.

Analysts were looking for earnings near $0.64 per share on revenue in the neighborhood of $240 million. The sales result was near the top end of management's guidance while earnings fell to the bottom end of the official guidance range.

A silicon wafer in the process of creating semiconductor chips.

Image source: Getty Images.

Now what

There was actually a lot of good news baked into this release. Semiconductor makers around the world are making large infrastructure investments to support their own growth plans, which is great for Ultra Clean and its sector peers. Looking ahead, Ultra Clean's guidance pointed to fourth-quarter sales of approximately $245 million and adjusted earnings of roughly $0.60 per diluted share. Both of these targets are more optimistic than Wall Street's consensus view, which currently calls for earnings of $0.55 per share on $229 million in top-line revenue.

Keep in mind that earnings are growing at a fantastic pace. The only ghost hiding behind the low-end profit performance here was a slight shift in the product mix, as Ultra Clean is making an effort to increase its market presence in the Far East where most of its direct customers can be found. That's hardly cause for a game-changing panic.

That being said, you can't blame market makers for taking some profits off the table here -- stock prices had more than quadrupled over the 52 weeks leading up to this report. Ultra Clean shares are not expensive, even after that tremendous one-year climb, and I see no reason to avoid it when given a sudden discount to work with.

Anders Bylund has no position in any of the 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

Ultra Clean Holdings Stock Quote
Ultra Clean Holdings
UCTT
$33.28 (3.00%) $0.97

*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
394%
 
S&P 500 Returns
127%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/19/2022.

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.