The LED sector is just not coming back like many turnaround investors would hope. Cree Inc. (NASDAQ: CREE) reported earnings after the close and the reaction is a negative one. Cree has tried to migrate from a growth story to a value story and that is often a very painful process for shareholders. The company called the current business environment as challenging.
The light-emitting diode developer turned in second quarter revenues and earnings which were short of the consensus Wall Street targets. Guidance is coming in under estimates as well.
Sales rose 18% in the last quarter to $304.1 million and earnings were $0.25 EPS versus Thomson Reuters estimates of $309.9 million and $0.26 EPS. Gross margin shows just how much decline there is now: this was 47.7% a year earlier but fell down to 35.3% this last quarter with guidance of gross margin coming in at 35% to 36% for the quarter ahead.
As far as guidance being soft, that is now put in a range of $290 million to $310 million in sales with earnings at $0.18 to $0.25 EPS. Thomson Reuters has a consensus of about $321 million in sales and $0.30 EPS.
After closing up 1.9% ahead of earnings, Cree shares are down 5.6% at $22.10 in the after-hours session against a 52-week range of $20.25 to $31.34. This now looks like four of the last five earnings releases have been disappointments.
Very few investors do very well when companies change from a growth story to a value story.
JON C. OGG
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