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II-VI to Buy Ascatron & INNOViON for SiC Technology Platform

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Zacks Equity Research
·3 min read
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II-VI Incorporated IIVI on Aug 12 announced that it reached a deal to purchase all outstanding shares of a leading developer of silicon carbide (“SiC”) epitaxial wafers — Ascatron AB. Also, the company communicated that it is set to buy the outstanding interests in INNOViON Corporation, a major provider of ion implantation services throughout the world.

Notably, financial terms of both the deals, which are expected to be completed by end of this year, were kept under wraps.

II-VI believes that the technology platforms from both companies will supplement its advanced SiC substrates and wafer fabrication footprint. In addition, they will complement the SiC device technology, which II-VI licensed from General Electric Company GE. The company will work on combining both capabilities to create a world-leading, vertically integrated 150-mm SiC technology platform.  This will help it in addressing the increasing demand for SiC power electronics.

II-VI Q4 Results

Separately, the company reported better-than-expected results in the fourth quarter of fiscal 2020 (ended Jun 30, 2020), wherein both earnings and revenues surpassed the Zacks Consensus Estimate.

In the reported quarter, the company pulled off an earnings surprise of 51.3%. Quarterly adjusted earnings were $1.18 per share, outpacing the Zacks Consensus Estimate of 78 cents. Notably, the bottom line increased 81.5% from the year-ago figure.

Revenues of $746.3 million surpassed the consensus mark of $720 million by 3.7%. Also, revenues increased from $362.7 million reported in the year-ago quarter. Notably, year-over-year growth in revenues was driven by a solid demand in the 3D-Sensing and communications market, led by persistent growth of 5G deployment and network infrastructure upgrades.

Notably, the company’s adjusted gross margin in the quarter was 42.3%, up 380 basis points.

Zacks Rank and Price Performance

The company, with $5.1-billion market capitalization, currently sports a Zacks Rank #1 (Strong Buy). It is poised to benefit from the growing demand for its products across key end markets combined with its market share gain in the quarters ahead.  For instance, strength across datacom, telecom and wireless communications end markets, driven by solid demand for optical components, modules and subsystems along with 5G optical infrastructure buildout are likely to drive its growth.

Also, the company’s acquisition of Finisar (September 2019) has been complementing its compound semiconductor and photonic solution platforms, and enhancing growth opportunities in the optical communications space.

The company’s shares have gained 33.8% compared with 1.8% growth recorded by the industry in the past six months.

 

 

Other Key Picks

A couple of other top-ranked stocks are Chart Industries, Inc. GTLS and Graco Inc. GGG. While Chart Industries sports a Zacks Rank #1 at present, Graco carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Chart Industries delivered an earnings surprise of 10.17%, on average, in the trailing four quarters.

Graco delivered an earnings surprise of 8.68%, on average, in the trailing four quarters.

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