A month has gone by since the last earnings report for Cypress Semiconductor (CY). Shares have lost about 1.3% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Cypress due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Cypress Q4 Earnings In Line With Estimates, Sales Lag
Cypress Semiconductor reported fourth-quarter 2019 non-GAAP earnings of 28 cents per share, inline with the Zacks Consensus Estimate. The figure was down 6.7% sequentially and 20% year over year.
Revenues of $559.6millionmissed the Zacks Consensus Estimate by 0.6%. Also, the figure was down 2.6% sequentially and 7.4% year over year. This reflects the adjustment for the NAND business divestiture, which was completed on Apr 1, 2019.
The European Commission had previously cleared the proposed acquisition of Cypress by Infineon Technologies. The proposed transaction received antitrust clearances in the United States, the European Union, Philippines, Taiwan, South Korea and Japan. However, approval from the Committee on Foreign Investment in the United States (CFIUS) and China’s State Administration for Market Regulation (SAMR) is still required.
Top Line in Detail
In Terms of Business Unit: Cypress reports in two organized segments, namely Microcontroller and Connectivity Division, and Memory Products Division.
MCD: This segment generated revenues of $401.3 million (72% of the total revenues), up 12.8% year over year but down 2.3% sequentially.
MPD: The segment generated revenues of $158.3 million (28% of revenues), down 36.4% year over year and 3.4% on a sequential basis.
In Terms of End Market: The company operates in three high-growth markets, namely IoT, Automotive and Legacy end markets.
IoT: The company generated 40% of total revenues from this market, down 60 basis points (bps) sequentially but up 850 bps year over year.
Automotive: This market generated 39.3% of total revenues, up 280 bps from the third quarter and 380 bps from the year-ago period.
Legacy: Cypress generated 20.7% of revenues from this market, down 20 bps sequentially and 1230 bps on a year-over-year basis.
In the fourth quarter, Cypress’ non-GAAP gross margin was 47.1%, up 20 bps sequentially but down 70 bps year over year.
Operating expenses were $179.7 million, down 19.2% year over year.
Non-GAAP operating margin was 21.1%, down 70 bps on a sequential basis and 340 bps from the year-ago quarter.
Balance Sheet and Cash Flow
At the end of the fourth quarter, cash, cash equivalents and short-term investments totaled $415.5 million compared with $343 million in the third quarter. Accounts receivables were nearly $301.8 million, down from $389.9 million in the third quarter.
Inventory declined to $297.9 million from $327.4 million in the third quarter.
How Have Estimates Been Moving Since Then?
Estimates review followed a downward path over the past two months.
At this time, Cypress has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Cypress has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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