Shares of
Ultratech, Inc.
(
UTEK
) are trending upward since this technology provider for the
semiconductor and nanotechnology markets reported second quarter
results on July 19.
Currently, this Zacks #1 Rank (Strong Buy) stock is trading around
its 52-week high. There is also potential for further upside based
on Ultratech's solid growth projection for fiscal 2012, its
transition to 28 nanometer logic devices and its rich patent
portfolio (which includes IBM Corp.'s (
IBM
) semiconductor packaging patents).
Q2 Beat on Higher Product Demand
On July 19, 2012, Ultratech reported fiscal second quarter 2012
earnings per share (EPS) of 41 cents, beating the Zacks Consensus
Estimate by 5.1%. Net sales jumped 9.6% over the comparable
prior-year quarter and 19.0% from the prior quarter to $59.1
million, surpassing the Zacks Consensus Estimate of $55.0 million.
Bookings increased about 12% from the prior quarter, while backlog
grew 7% in the past six months.
The revenue advance was driven by a 10.0% increase in Product
revenue, as demand for Ultratech's advanced packaging,
laser-processing and HB-LED (high-brightness light emitting diodes)
systems increased. Revenues from the Service segment grew 7.4% year
over year, while Licenses dropped 23.1%. Region-wise, contributions
from Europe and Asia were encouraging.
Gross margin improved 326 basis points from the year-ago quarter to
54.2%. Margin expansion was mainly attributable to lower service
and manufacturing costs, as well as better capacity utilization,
partially offset by higher material costs. Despite a 12.1%
year-over-year increase in operating expenses, the operating margin
increased to 22.3% from 19.9% in the year-ago quarter.
2012 Guidance Raised
Expecting the second quarter momentum to continue, Ultratech
remains upbeat about the second half of fiscal 2012. Despite a
bleak spending environment and an expected drop in semiconductor
capital expenditure, the company expects solid bookings growth,
favorable backlog and transition to 28 nanometer logic devices.
Ultratech will be ready with a significant number of laser
processing systems (for semis) to meet the increasing demand at the
28nm node. The company also believes that cancellations or push
outs will be limited.
Orders for LED systems are expected to be higher in the second half
of the fiscal year than in the first.
Upbeat second half expectations led Ultratech to raise its fiscal
2012 guidance. The company now expects revenue growth of 5%-10%
(previously flat to up 5%) and EPS growth of 10%-15% (previously
flat to up 10%). Gross margin is expected to be approximately 55%.
Zacks Consensus Estimates Rise
Following the earnings release, the Zacks Consensus Estimate for
the third quarter gained 5% to 42 cents, as 3 of 4 estimates were
revised higher.
The Zacks Consensus Estimate for 2012 rose 4.3% to $1.68 as all 4
estimates were revised higher in the last 30 days.
Valuation Is Attractive
Ultratech shares are up 31.3% year-to-date, compared with a 9.7%
increase for the S&P 500.
Shares trade at a P/E of 20.1X with respect to the peer group P/E
of 74.8X (discount of 73.1%). Coupled with the 1-year return on
equity of 14.3%, this indicates a strong possibility of further
upside.
6-Month Chart
Ultratech competes with Mattson Technology Inc. (
MTSN
), Applied Materials Inc. (
AMAT
) and CSR plc (
CSR
) in the semiconductor equipment space. The company's shares have
traded at a premium to its rivals.
The significant increase in the stock price in recent months was on
account of the encouraging sales trend and earnings growth
momentum. The stock is currently above its 50 and 200-day moving
averages of 30.98 and 29.70, respectively.
Trading volumes are considerably lower than its peers.
Founded in 1979, California-based Ultratech, Inc. provides
photolithography and laser thermal processing equipment to the
semiconductor and nanotechnology markets. Within the semiconductor
industry, the company's solutions target advanced packaging
applications and advanced annealing applications. Within the
nanotechnology industry, the company's products are used in the
manufacture of thin film head magnetic recording devices, ink jet
print heads, and HBLEDs.
ULTRATECH STEP (UTEK): Free Stock Analysis
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