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Vishay Intertechnology (VSH) Q2 Earnings Top, Revenues Lag

Zacks Equity Research

Vishay Intertechnology, Inc. VSH delivered second-quarter 2019 adjusted earnings of 36 cents per share, which surpassed the Zacks Consensus Estimate by 2 cents. However, the figure declined 33.3% year over year and 29.4% sequentially.

Revenues of $685.24 million missed the Zacks Consensus Estimate of $686 million. Further, the top line decreased 9.9% on a year-over-year basis and 8% from the previous quarter.

The company suffered from weakening demand from distributors owing to high level of inventories in the supply chain. This primarily led to sluggish performance during the reported quarter.

Further, imposition of U.S. tariffs remained a major headwind during the second quarter.

Vishay’s book-to-bill ratio was 0.69 at the end of the second quarter.

Following the release of second quarter results, the stock has plunged 3.7%. Further, shares of Vishay have lost 5.6% on a year-to-date basis against the industry’s rally of 27.2%.

Nevertheless, the company’s ongoing inventory correction remains positive. Further, its continued focus toward expanding manufacturing capacities is a tailwind. Additionally, Vishay has initiated global cost reduction and management rejuvenation programs.

All these strong endeavors are likely to aid its financial performance in the near term which in turn will instill optimism in the stock.

 



Product Segments in Detail

Resistors & Inductors: This product segment generated revenues of $242 million (35.3% of total revenues), down 2% year over year. The book-to-bill ratio for this product is at 0.88 in the reported quarter. Vishay’s manufacturing inefficiencies owing to adaptation to lower outputs impacted the segment negatively. Further, high level of inventory at distributors also weighed on the results.

Nevertheless, the company continued to experience strong momentum across automotive, industrial, medical and military end markets with resistors and inductors.

MOSFET: This product line generated revenues of $129 million (18.8% of total revenues), declining 5% year over year. The book-to-bill ratio for this product stood at 2.54 at the end of the reported quarter. The segment bears the brunt of declining inventories in the supply chain, which is hurting the selling price of this product line.

However, the company’s strong momentum with this product line in the automotive end market remains a positive. Additionally, expanding internal and foundry capacities for MOSFETs are tailwinds.

Capacitors: This product line revenues of generated $111 million (16.2% of total revenues), up 2% year over year. The product line’s solid momentum across America and Europe remained positive throughout the quarter under review. Further, growing opportunities for capacitors in the areas of power transmission and electro cars were tailwinds. Additionally, the company’s solid momentum in the U.S. military market contributed well. Moreover, governmental programs in China continued to aid revenue generation in this product segment during the second quarter. The book-to-bill ratio for this product stood at 0.68 in the reported quarter.

Diodes: The segment generated revenues of $142 million (20.7% of total revenues), slumping 21% from the year-ago quarter. This was primarily due to the distributors holding high level of inventories. The book-to-bill ratio for this product stood at 0.52 during the quarter under review.

Nevertheless, the strong momentum of this product line in the automotive and industrial sector remained a major positive.

Optoelectronics: This product line generated revenues of $61 million (9% of total revenues) during the reported quarter. The figure was down 18% from the year-ago quarter. The book-to-bill ratio for this product stood at 0.8 during the reported quarter. The segment’s top line was hurt by unfavorable product mix and high inventories held by distributors.

Vishay Intertechnology, Inc. Price, Consensus and EPS Surprise

 

Vishay Intertechnology, Inc. Price, Consensus and EPS Surprise

Vishay Intertechnology, Inc. price-consensus-eps-surprise-chart | Vishay Intertechnology, Inc. Quote

Operating Details

In second-quarter 2019, gross margin came in at 25.5%, contracting 440 bps on a year-over-year basis.

Selling, general and administrative expenses were $95.11 million, decreasing 8.5% year over year. However, as a percentage of total revenues, the figure expanded 30 bps from the year-ago quarter.

Further, operating margin came in 11.6%, which contracted 460 bps on a year-over-year basis.

Balance Sheet & Cash Flows

As of Jun 29, 2019, cash and cash equivalents were $790.91 million, increasing from $749.43 million as of Mar 30, 2018. Short-term investments were $163,000, down from $8.4 million in the previous quarter. Inventories were $463.5 million, down from $480.2 million in the previous quarter.

In the second quarter, the company generated $56.3 million of cash from operations, down from $79.5 million in the previous quarter.

The company’s free cash flow in the reported quarter came in $22.6 million, declining from $43.5 million in the previous quarter.

Guidance

For third-quarter 2019, Vishay expects total revenues to be in the range of $600 million to $640 million.

Further, the company anticipates gross margin to lie between the range of 24% and 25%.

Zacks Rank & Key Picks

Vishay currently has a Zacks Rank #4 (Sell).

Some better-ranked stocks in the broader technology sector are Rosetta Stone RST, NetEase NTES and CACI International CACI. While Rosetta Stone sports a Zacks Rank #1 (Strong Buy), NetEase and CACI carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Rosetta Stone, NetEase and CACI is currently projected to be 12.5%, 14.85% and 10%, respectively.

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