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Ultra Clean (UCTT) Q3 Earnings: Is Disappointment in Store?

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Ultra Clean (UCTT) Q3 Earnings: Is Disappointment in Store?

Ultra Clean Holdings (UCTT) third-quarter results are likely to be hurt by increased interest expenses and declining demand from OEM customers.

Ultra Clean Holdings, Inc. UCTT is set to report third-quarter 2018 results on Nov 6.

The company beat the Zacks Consensus Estimate in one of the trailing four quarters, delivering an average positive surprise of 1.7%.

In the last reported quarter, the company's earnings of 55 cents per share lagged the Zacks Consensus Estimate by 2 cents. The figure declined 11.3% from the year-ago quarter.

Revenues increased 27.1% year over year to $290.2 million and beat the Zacks Consensus Estimate of $290 million by a slight margin. The year-over-year growth was primarily driven by record revenues in the display business.

For the third quarter, Ultra Clean expects revenues between $200 million and $220 million and non-GAAP earnings between 28 cents and 38 cents per share. 

The Zacks Consensus Estimate for third-quarter earnings is pegged at 31 cents per share, indicating year-over-year decline of 50%. Further, the consensus mark for revenues is pegged at $229 million, down 5.6% from the year-ago quarter.

Let’s see how things are shaping up for the upcoming announcement.

Factors Likely to Influence Q3 Results

In the second quarter, Ultra Clean witnessed a decline in orders from original equipment manufacturing (OEM) customers as certain manufacturers deferred their capital investment. This is expected to hurt top-line growth as well as profitability.

Moreover, a fire, which broke out in one of its facilities in Balan, Republic of Korea, is expected to have an adverse impact on third-quarter revenues.

Nevertheless, stringent cost cutting is expected to boost profitability. Additionally, Ultra Clean is likely to benefit from continuing momentum in display segment.

Moreover, Ultra Clean acquired Quantum Global Technologies for $342 million in second-quarter, which will add to the bottom line in the soon-to-be reported quarter. The acquisition broadened the company’s customer base in wafer fabrication equipment (WFE) space.

Ultra Clean Holdings, Inc. Price and EPS Surprise

Ultra Clean Holdings, Inc. Price and EPS Surprise | Ultra Clean Holdings, Inc. Quote

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. The Sell-rated stocks (Zacks Rank #4 or #5) are best avoided.

Ultra Clean has a Zacks Rank #3 and an Earnings ESP of -5.44%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks With a Favorable Combination

Here are some companies, which, per our model, have the right combination of elements to post an earnings beat in their upcoming releases:

The Trade Desk Inc. TTD has an Earnings ESP of +0.2% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

HubSpot HUBS has an Earnings ESP of +136.4% and a Zacks Rank #2.

CenturyLink, Inc. CTL has an Earnings ESP of +10.3% and a Zacks Rank #2.

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Ultra Clean Holdings, Inc. (UCTT) : Free Stock Analysis Report
 
The Trade Desk Inc. (TTD) : Free Stock Analysis Report
 
HubSpot, Inc. (HUBS) : Free Stock Analysis Report
 
CenturyLink, Inc. (CTL) : Free Stock Analysis Report
 
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