Diodes Inc. Earnings Cheat Sheet: Increasing Costs Tighten Margins as Net Income Falls

Diodes Incorporated (NASDAQ:DIOD) reported its results for the third quarter. Diodes is a designer, manufacturer, and supplier of high-quality, application specific standard products within the discrete and analog semiconductor markets, in the consumer electronics, computing, communications, industrial, and automotive markets.

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Diodes Incorporated Earnings Cheat Sheet for the Third Quarter

Results: Net income for Diodes Incorporated fell to $10 million (21 cents per share) vs. $21.2 million (46 cents per share) a year earlier. This is a decline of 52.9% from the year earlier quarter.

Revenue: Fell 1.6% to $160.6 million from the year earlier quarter.

Actual vs. Wall St. Expectations: DIOD reported adjusted net income of 26 cents per share. By that measure, the company fell short of mean estimate of 34 cents per share. It fell short of the average revenue estimate of $164.5 million.

Quoting Management: sults, Dr. Keh-Shew Lu, President and Chief Executive Officer of Diodes Incorporated, stated, “We continued to see broad weakness across global markets that began in May and accelerated throughout the third quarter. Despite this softness, we were still able to execute our strategy of gaining market share by shifting our product mix to lower margin products to best utilize our installed capacity, and we grew our nine month revenue 10 percent over the prior year period. In response to these market conditions, we have also implemented cost reduction actions that include the delay of capital investments, hiring freezes, a reduction in factory overtime, as well as temporary reductions on travel.”

Key Stats:

Last quarter’s profit decrease breaks a streak of four consecutive quarters of year-over-year profit increases. In the second quarter, net income rose 8% from the year earlier, while the figure increased 31.6% in the first quarter, 68.6% in the fourth quarter of the last fiscal year and more than threefold in the third quarter of the last fiscal year.

A year-over-year revenue decrease last quarter snaps a streak of four consecutive quarters of revenue increases. The best quarter in that span was the third quarter of the last fiscal year, which saw revenue rise 33.6%.

Gross margin shrank 9.2 percentage points to 28.1%. The contraction appeared to be driven by increased costs, which rose 13% from the year earlier quarter while revenue fell 1.6%.

The company fell short of estimates last quarter after being in line with expecations the quarter before with net income of 43 cents.

Looking Forward: Analysts appear increasingly negative about the company’s results for the next quarter. The average estimate for the fourth quarter has moved down from 50 cents a share to 30 cents over the last ninety days. The average estimate for the fiscal year is $1.53 per share, down from $1.88 ninety days ago.

Competitors to Watch: ON Semiconductor Corp. (NASDAQ:ONNN), Fairchild Semicond. Intl. (NYSE:FCS), Alpha and Omega Semicond. Ltd (NASDAQ:AOSL), Microsemi Corporation (NASDAQ:MSCC), Vishay Intertechnology (NYSE:VSH), IXYS Corporation (NASDAQ:IXYS), Texas Instruments Inc. (NYSE:TXN), Intel Corp. (NASDAQ:INTC), Intl. Rectifier Corp. (NYSE:IRF), Infineon Tech. AG (IFNNY), and National Semicond. Corp. (NYSE:NSM).

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(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)