Diodes Incorporated Earnings: Margins Shrink as Revenue and Net Income Fall

Diodes Incorporated (NASDAQ:DIOD) reported its results for the fourth 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 Fourth Quarter

Results: Net income for Diodes Incorporated fell to $3.1 million (7 cents per share) vs. $24 million (52 cents per share) a year earlier. This is a decline of 87% from the year earlier quarter.

Revenue: Fell 12.5% to $143.3 million from the year earlier quarter.

Actual vs. Wall St. Expectations: Diodes Incorporated reported adjusted net income of 9 cents per share. By that measure, the company beat the mean estimate of 8 cents per share. It fell short of the average revenue estimate of $147.1 million.

Quoting Management: Commenting on the results, Dr. Keh-Shew Lu, President and Chief Executive Officer of Diodes Incorporated, stated, “I am very pleased to report that Diodes continued its growth during 2011 and achieved record revenue for the full year despite ongoing uncertainty in the global economy. This year also represented our 21st consecutive year of profitability, which underscores the success of our profitable growth strategy. The broad market weakness that began in late second quarter continued to impact all of our market segments throughout the fourth quarter, but past design win momentum and new product initiatives enabled further market share gains. Although productivity and manufacturing efficiencies in our Shanghai facility have recovered to prior levels, gross margin continues to be negatively impacted by the effects of the market softness, including increased pricing pressure, continued sales of lower margin commodity products and less than maximum utilization of manufacturing capacity, despite the increase in our finished goods inventory in advance of the Chinese New Year.”

Key Stats:

Gross margins fell 13.5 percentage points to 24.8%. The contraction appeared to be driven by falling revenue, as the figure fell 12.5% from the year earlier while costs rose 6.6%.

The company has now seen net income fall in each of the last two quarters. In the third quarter, net income fell 52.9% from the year earlier quarter.

The company topped expectations last quarter after falling short of forecasts in the third quarter with net income of 26 cents versus a mean estimate of net income of 34 cents per share.

Revenue has fallen in the past two quarters. In the third quarter, revenue declined 1.6% to $160.6 million from the year earlier quarter.

Looking Forward: Over the past ninety days, the average estimate for the first quarter of the next fiscal year has fallen from 27 cents per share to 14 cents, indicating that analysts are growing pessisimistic about the company’s performance next quarter. The average estimate for the fiscal year is $1.24 per share, down from $1.53 ninety days ago.

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

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To contact the reporter on this story: Derek Hoffman at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com