Bear of the Day: Vishay (VSH)

Vishay Intertechnology (VSH) is in a tough semiconductor market in 2019. This Zacks Rank #5 (Strong Sell) is still seeing its 2019 earnings estimates cut. When will the semis bottom?

Vishay Intertechnology is one of the world's largest manufacturers of discrete semiconductors (diodes, rectifiers, MOSFETs, optoelectronics, and selected ICs) and passive electronic components (resistors, inductors, and capacitors).

These components are used in virtually all types of electronic devices and equipment, in the industrial, computing, automotive, consumer, telecommunications, military, aerospace, power supplies, and medical markets.

As of May 2019, its largest segments were Industrial and Automotive, which represented 38% and 28%, respectively of sales.

A Beat in the First Quarter

On May 9, Vishay reported its first quarter earnings and beat the Zacks Consensus by a penny. Earnings were $0.51 versus the consensus of $0.50.

Revenue fell sequentially to $745.2 million from $775.9 million in Q4, but was still up year-over-year as it made $716.8 million in the year ago quarter.

Gross margins were 28.3%.

It had strong free cash flow of $109 million in the quarter.

The company had an investor day presentation in May 2019. This slide shows where it's 2018 revenues were coming from.

Additionally, for those wondering about concentration risk, no single OEM customer represents over 7% of the company's sales.

Raised Quarterly Dividend Again

In May 2019, the company raised its quarterly dividend 12%. It is currently yielding 2.5%.

It has raised the dividend each of the last 4 years.

Analysts Cut Estimates

The semiconductor industry is cyclical. While many believed the worst was over for it by the end of 2018, they were too early.

The estimates continue to be cut on most of the semiconductors for 2019 and 2020. Vishay is no exception. That's why it is a Zacks #5 (Strong Sell).

For 2019, 3 estimates were cut in the last 60 days which pushed the Zacks Consensus Estimate down to $1.65 from $2.16. That's an earnings decline of 22% as the company made $2.12 a year ago when the semi boom was still going full throttle.

Two estimates were also lowered for 2020 in the last 2 months, pushing down the 2020 Zacks Consensus Estimate to $1.76 from $2.07. That's an earnings increase of 6.5%, but will those estimates stick?

Shares Falling Again

After a dismal end to 2018, the semiconductor stocks, including Vishay, staged a big recovery. But recently, the bears have returned and have pushed the shares down 13.6% year-to-date.

Over the last year, they've fallen 36.2%.

They're pretty cheap, even with the earnings estimate cuts.

Vishay trades with a forward P/E of 9.6. But be warned. With the estimates still being cut, the semiconductors look like value traps.

Competitor Broadcom (AVGO) is also pretty cheap, with a forward P/E of 12.3. It reports earnings shortly.

The semiconductors may not have bottomed yet. The earnings estimates revisions tell the tale.

The Hottest Tech Mega-Trend of All                 

Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.

See Zacks' 3 Best Stocks to Play This Trend >>              

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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