Cree shares rise in after-hours trading on earnings report

Cree shares rose as much as nine percent in after-hours trading after the LED lighting company reported results that exceeded Wall Street’s expectations.

CEO Chuck Swoboda told analysts during a conference call that the company is “well-positioned for a strong second half” in its fiscal year.

Cree reported after the markets closed Tuesday that it generated adjusted net income of $30.5 million, or 30 cents per share, for its fiscal second quarter that ended Dec. 27. Although that was lower than the $37.9 million in revenue recorded a year ago, analysts polled by Bloomberg News had forecast that adjusted net income would be 22 cents per share.

The Durham-based company’s five percent revenue growth also was more than anticipated.

Revenue for the quarter totaled $435.8 million, up from $413.2 million a year ago and up 2 percent versus the prior quarter. Analysts had predicted revenue of $434.7 million.

Cree produces LED light bulbs and also makes indoor and outdoor LED light fixtures and components that other companies use in LED lights. In addition, its LEDs illuminate mobile phones, televisions, electric signs and car dashboards.

Revenue from lighting products rose 11 percent to $255 million, accounting for 59 percent of total revenue. Swoboda noted that the lighting business is approaching $1 billion in annual revenue.

Revenue from LED products, a segment impacted by intense competition that has depressed prices, rose one percent to $153.4 million.

Going forward, “lighting will be the biggest revenue growth driver,” Swoboda said.

That growth will be powered by commercial sales, as sales of bulbs to consumers are expected to be flat over the next 12 months, Swoboda said.

In September, Cree repositioned its bulbs, which are sold in Home Depot stores, as a premium-priced product that stresses performance.

“The fact that we are able to sell that product at a premium price in the stores over the last couple quarters shows shows that there is a market for that product and it’s, I believe, a viable strategy,” Swoboda said.

Revenue from the company’s power and RF division totaled $27.5 million, down from $31.1 million a year ago. Cree plans to spin off that business, now named Wolfspeed, as a publicly traded company but will continue to own a majority stake.

Wolfspeed, which accounted for six percent of Cree’s revenue, makes power components used in computer servers and for solar energy, among other things. Its radio frequency transistors and integrated circuits are used in radar and telecommunications systems.

Swoboda said that softness in RF orders led to the decline, but added that he anticipates higher revenue for both the RF and power businesses in the second half of the fiscal year.

Still, when you factor in the “near-term revenue softness and market conditions for IPOs,” Swoboda said, Wolfspeed’s initial public offering isn’t likely to occur “before the second half of calendar 2016.”

“In the near-term, we’re focused on growing the business, as we have the flexibility to be patient and get the timing right,” Swoboda said.

Swoboda said the slow start to the power and RF business means that revenue for the full fiscal year might not achieve the company’s 10 percent growth target, but it should still hit its profit goals for the year.

Earlier Tuesday, Cree shares closed at $24.29, up 15 cents. The stock’s 52-week high, reached last February, exceeded $39.

This story was originally published January 19, 2016 at 4:50 PM with the headline "Cree shares rise in after-hours trading on earnings report."