On February 5, we downgraded photographic image company,
Fujifilm Holdings Corporation
), to Underperform based on the company's disappointing outlook
for the fourth quarter 2013.
Why the Downgrade?
Estimates for Fujifilm, which focuses mainly on the photo
imaging business, have been declining ever since it reported a
bleak outlook for the fourth quarter of 2013. Fujifilm reported
impressive results in the third quarter, which grew year over
year as well as beat Zacks Consensus Estimates. However, it
reduced its overall outlook for the upcoming quarter. The company
reduced its operating income forecast to ¥105.0 billion from the
previously announced ¥110.0 billion. However, the company now
expects its net income for the year to come at ¥50.0 billion
compared with the previously announced ¥45.0 billion. Fourth
quarter revenue guidance was maintained at ¥2,210 billion,
Following the not-so-great outlook for the fourth quarter, the
Zacks Consensus Estimate for 2013 has gone down 18.1% to $1.04
per share. The Zacks Consensus Estimate for 2014 has also
declined 0.6% to $1.49.
Causes for Concern
The deterioration of the company's traditional photography
business is a major threat to its prosperity. Also, the vast
presence of Fuji's operation beyond Japan exposes it to various
regulations in different regions. The major source of income
generating Document Solutions segment is also not performing as
desired and is losing market share.
On top of this, yen appreciation is a major drawback for the
company. As most of the businesses of Fuji are done outside
Japan, an increase in the value of yen leads to lower earnings
for the company. Based on these factors, it seems difficult for
Fuji to attain its revenue guidance for the upcoming quarter.
Other Stocks to Consider
While we remain bearish on Fuji, other technology stocks worth
a look are
), holding a Zacks Rank #1 (Strong Buy); while
On Semiconductor Corp.
); both hold a Zacks Rank #2 (Buy).
DIODES INC (DIOD): Free Stock Analysis Report
FUJIFILM HLDGS (FUJIY): Free Stock Analysis
INTERDIGITL INC (IDCC): Free Stock Analysis
ON SEMICON CORP (ONNN): Free Stock Analysis
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