Cree Adds Huawei Woes on Top of LED Softness

Cree Inc. (NASDAQ: CREE) is riding a trend of secular change in the world of LED lighting. The problem is that LED bulbs aren’t always as fast a growth segment as some investors would have hoped. The company is also enduring problems around the Huawei ban.

With fourth-quarter revenues of $251.2 million for the period ending June 30, this represented a 5% decrease compared to the June quarter of 2018 and was an 8% sequential quarterly decrease. While the company reported a GAAP net loss from continuing operations of $34.6 million for its fourth quarter of 2019, its adjusted earnings of $11.5 million that will be used by Wall Street analysts came to $0.11 per share. Unfortunately, that is lower than the $14.5 million in adjusted profits and the $0.14 per share from a year ago.

Refinitiv had projected earnings of $0.10 per share on the comparable adjusted basis, and the consensus revenue estimate was $249 million.

Cree also offered guidance for the current climate. The company is targeting revenues from continuing operations to be in a range of $237 million to $243 million, and its adjusted earnings per share is targeted to be at a loss of $3 million to $7 million, or −$0.03 to −$0.07 per diluted share. Its targets from continuing operations do not include any estimated change in the fair value of Cree’s Lextar investment.

Refinitiv’s consensus estimates for the current quarter’s guidance were $259.2 million in revenue and $0.15 in earnings per share.

As for Cree’s fiscal year 2019 as a whole, the company’s press release said:

For fiscal year 2019, Cree reported revenue of $1.1 billion, which represents a 17% increase when compared to revenue of $0.9 billion for fiscal 2018. GAAP net loss from continuing operations was $57.9 million, or $0.56 per diluted share. This compares to a GAAP net loss from continuing operations of $16.4 million, or $0.17 per diluted share, for fiscal 2018. On a non-GAAP basis, net income from continuing operations for fiscal year 2019 was $76.9 million, or $0.74 per diluted share, compared to $36.9 million, or $0.37 per diluted share, for fiscal 2018.

Gregg Lowe, Cree’s CEO, said of the quarter:

We are pleased with our performance in the quarter as non-GAAP earnings per share was within the top end of our updated range despite the challenging operating environment. While the Huawei ban and softness in the LED market will continue to impact the sector in the short-term, our long-term outlook remains unchanged – there is a significant opportunity to help customers make the shift from silicon to silicon carbide solutions for their next generation applications.

Cree’s shares closed down four cents at $58.24 on Tuesday ahead of earnings, and the 52-week range is $33.72 to $69.21. Its shares were initially trading down 7% at $54.20 in the after-hours trading session.

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