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Bear of the Day: Vishay (VSH)

Tracey Ryniec

Vishay Intertechnology (VSH) continues to grapple with the tough semiconductor market in 2019.  This Zacks Rank #5 (Strong Sell) is again 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.

A Beat in the Second Quarter as Sales Plunge

On July 30, Vishay reported its second quarter results and beat the Zacks Consensus Estimate by 2 cents. Earnings were $0.36 versus the consensus of $0.34.

Revenue sank to $685.2 million from $761 million in the year ago quarter.

The company blamed high levels of inventories in the supply chain which led to lower than expected demand, mainly from distribution, which negatively impacted the quarter.

It announced a $15 million global cost reduction and management rejuvenation program, which will result in layoffs.

The semiconductors are cyclical and, right now, the industry is in the downward part of the cycle.

Estimates Slashed Again

For the third quarter, the company said it expected an acceleration of the reduction of inventories in the channel and guided for revenue in the range of $600 to $640 million.

The analysts came away from the report more bearish than ever. Even though they've been cutting the earnings estimates all year long, they cut again after the report.

The 2019 Zacks Consensus Estimate has fallen to just $1.29 from $1.65 in the last month with one analyst cutting in the last week.

That's an earnings decline of 39% as Vishay made $2.12 last year.

2020 isn't looking much better. The analysts have been cutting estimates there too.

The 2020 Zacks Consensus Estimate has fallen to $1.07 from $1.76 in the prior 30 days. That's another decline of 16.8%.

A Buying Opportunity?

It's been a tough 52-weeks for the semiconductor stocks even as they tried to rebound in 2019.

Over the last year, Vishay shares have fallen 33% and are still down 9.9% in 2019.



And while it has a forward P/E of 12, with those earnings estimates being cut, it's more of a value trap than a true value.

For those interested in this industry, however, you might want to consider Broadcom (AVGO). While estimates are being cut on Broadcom too, it's still expected to grow earnings in fiscal 2019 by 2.6%. It's a Zacks Rank #3 (Hold).

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