Why Ultra Clean Holdings Inc Shares Plummeted Today

Is Ultra Clean Holdings' drop meaningful? Or just another movement?

Steve Symington
Steve Symington
Apr 29, 2014 at 3:03PM
Technology and Telecom

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Ultra Clean Holdings Inc (NASDAQ:UCTT) fell a harrowing 26% Tuesday after the company turned in mixed first-quarter results and lower-than-expected forward guidance.

So what: Quarterly revenue rose 43.6% year over year to $144.2 million, which translated to adjusted net income of $0.27 per diluted share. Analysts, on average, were looking for adjusted earnings of $0.30 per share on sales of $137.56 million.

For the current quarter, Ultra Clean expects revenue in the range of $128 million to $133 million, with adjusted earnings per diluted share of $0.18 to $0.21. By contrast, analysts were modeling significantly higher second-quarter earnings of $0.26 per share on sales of $132.33 million.

Now what: CEO Clarence Granger admitted Ultra Clean's bottom-line miss wasn't ideal as gross margin came in lower than expected at 16.2%. To be fair, however, he also noted that's still within their previously outlined gross margin target range of 15% to 18%.

In the end, though the market remains disappointed, I don't think Ultra Clean is a broken company. I'm not quite ready to dive in just yet, but at the very least, I think investors would be wise to add Ultra Clean to their watchlists and keep tabs on its progress going forward.