Cree Inc. reported higher-than-expected earnings on Tuesday due to growth in its power provider company Wolfspeed and margin improvement in its LED products and lighting.
The lighting products company reported a GAAP net loss of $11 million in the first-quarter of fiscal 2019, or 11 cents per share, in comparison to a $20 million GAAP net loss in the first-quarter of fiscal year 2018.
On a non-GAAP basis, the company reported net income of $22 million, or 22 cents per share, in comparison to net income of $4 million in the first-quarter of 2018. The earnings of the lighting products company were 10 cents higher than analyst estimates polled by Yahoo Finance.
“This is an excellent result given the headwinds facing the businesses related to tariffs and global trade tensions,” said Gregg Lowe, Cree’s chief executive officer. “While these headwinds may persist for some time, we remain optimistic about the opportunity to increase shareholder value over the long term by executing our strategic plan.”
Cree estimates its non-GAAP net income to be between 15 cents and 19 cents per share in the second quarter of fiscal 2019. Analysts currently estimate Cree’s earnings will be 13 cents per share in the second quarter.
These estimates take into account a projected 3-cent reduction in second-quarter earnings due to tariffs. The company expects tariffs will reduce its earnings by up to 5 cents per share in the third quarter.
The Durham-based company reported a 13 percent increase in revenue to $408 million. It is hopeful to keep its revenue streams constant in the second quarter with a target revenue range of $398 million to $418 million. Analysts polled by Yahoo Finance are optimistic and expect revenues to be between $410 million and $435 million.
The company’s recent growth can be largely attributed to growth in its Wolfspeed business. Wolfspeed, an innovator of power and radio frequency semiconductors, grew its revenue 93 percent over the past year to $127.4 million.
The significant revenue increase brought Wolfspeed to 31.2 percent of Cree’s total revenue, 12.8 percentage points higher than its 18.4 percent share a year ago.
Its Lighting Products business saw a 10 percent drop in revenues to $134 million, dropping its revenue share 8.7 percentage points to 32.8 percent.
Cree also experienced a severe increase in cash flow inflows during the first quarter, with cash and cash equivalents growing 121 percent to $336.3 million. The increase is mainly due to a $575 million inflow in proceeds from convertible notes.
Cree’s share price is up 14.7 percent since the start of the week.
As it looks to future growth, Lowe is confident in continual growth. The company recently announced a strategic long-term agreement to supply its silicon carbide wafers to one of the world’s leading power device companies. The agreement is valued at $85 million.
“I recently passed my one-year anniversary. And as I reflect back, it’s very gratifying to see the progress that the team has made,” said Lowe. “While we know there will be some bumps along the way as we execute our long-range transformation plan, [the first quarter] represented another step in the right direction.”
The announcement can be found here.
