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Fujifilm's Q3 Earnings Up Y/Y

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Fujifilm Holdings Corporation (FUJIY) reported net income of ¥5.2 billion ($51.8 million) for the third quarter of fiscal 2014 (ended Dec 31, 2013), up 57.6% year over year. The hike in earnings was a result of increase in both revenues and margins.

Revenues: Revenues in the reported quarter improved 9.2% year over year to ¥600.1 billion ($5,978.4 million). The year-over-year rise in revenues was attributable to strong sales in the medical systems business, the graphic systems business, documents business and favorable effects of the yen depreciation. However, revenue growth was partially offset by decline in the demand for compact digital cameras.

Revenues from the Imaging Solutions segment came in at ¥101.7 billion ($1,012.8 million) and accounted for 16.9% of total revenue. The Information Solutions segment contributed ¥223.3 billion ($2,224.3 million) or 37.2% of total revenue and the Document Solutions segment generated ¥275.2 billion ($2,741.3 million) or 45.9% of total revenue.

Of the total revenue, domestic revenues accounted for 40.5%, while international revenues contributed the remaining 59.5%.

Costs/Margins: Gross margin in the fiscal third quarter stood at 39.2%, rising 110 basis points from the year-ago quarter. Selling, general and administrative (SG&A) and research and development (R&D) expenses, together accounted for ¥193.2 billion ($1,925.0 million), representing 32.2% of the total revenue.

Balance Sheet: Cash and cash equivalents at the end of the period was ¥555.7 billion ($5,281.1 million) registering an increase of 7.9% from the previous quarter.

The company’s long-term debt stood at ¥315.8 billion ($3,001.1 million) as of Dec 31, 2013, up 0.4% sequentially.

Cash flow: Net cash from operating activities for fiscal third-quarter increased to ¥58.3 billion ($581.0 million) versus ¥34.8 billion ($429.2 million) in the comparable quarter last year. Capital expenditure for the reported quarter was ¥19.5 billion ($194.7 million), compared with ¥22.3 billion ($274.5 million) in the third quarter of fiscal 2013.

Outlook: Fujifilm increased its guidance for fiscal 2014, based on strong financials for the quarter. The company increased the revenue guidance to ¥2,400.0 billion from ¥2,350.0 billion, representing a year-over-year increase of 8.4%. Operating income is maintained at ¥140.0 million, an increase of 22.7% from fiscal 2013. Moreover, Fujifilm estimates its net income for the coming fiscal to be ¥80.0 billion, up from ¥70.0 billion expected earlier, increasing 47.4% year over year. This will lead to an earnings per share of ¥166.01.

Other Stocks to Consider

Fujifilm currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the semiconductor industry include Ultra Clean Holdings Inc. (UCTT), Brooks Automation, Inc. (BRKS) and Finisar Corp. (FNSR). All these stocks sport a Zacks Rank #1 (Strong Buy).

Note:

1. The effective currency exchange rates used for 1 U.S. Dollar against Japanese Yen for Income Statement and Cash Flow Statement were ¥100.38 and ¥81.13 for quarter ended Dec 2013 and Dec 2012, respectively.

2. The effective currency exchange rate used for 1 U.S. Dollar against Japanese Yen for Balance Sheet was ¥105.22 for the quarter ended Dec 2013.

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