Zacks_Analysts' Blog : Diodes Beats Estimates - Analyst Blog

Diodes Incorporated (DIOD) reported non- GAAP diluted earnings per share of 55 cents for the fourth quarter 2010, ahead of the Zacks Consensus Estimate of 50 cents. When compared on a sequential and year-over-year basis, earnings rose 7.8% and 52.8%, respectively.

For the fiscal year 2010, the company earned $1.82 per share, up from 55 cents in the previous year. The Zacks Consensus Estimate was $1.77.

Quarterly Performance

Revenue for the reported quarter of $163.8 million missed  the Zacks Consensus Estimate of $164.0 million by a narrow margin, but was up 25.7% from last year and 0.4% sequentially.

For the fiscal year 2010, revenue was $612.9 million, up from $434.4 million in the previous year. The result beat the Zacks Consensus Estimate of $612.0 million marginally.

Gross profit for the company was $62.6 million, an increase of 49.8% from the prior year quarter. Gross margin increased 6.2 percentage points to 38.3%.

Operating profit increased 133.3% from the year ago quarter to $ 32.3 million. Operating margin for the quarter was 19.7%, a rise of 9.1 percentage points.

For the quarter, the company had $28.0 million in cash flow from operations, $7.1 million net cash flow and $5.5 million free cash flow.

Quarter Ahead

Management hinted that future growth of the company will likely be driven by consistent design win traction, new product initiatives and additional opportunities to capitalize on Zetex cross-selling synergies.

On the revenue front, management expects forthcoming quarterly revenue to be flat to down five percentage points compared to the fourth quarter. Additionally, gross margin is expected to be 36.5%, plus or minus one percentage point. Operating expenses are expected to be comparable to the fourth quarter level on a percent of revenue basis. Income tax is to range between 17.0% and 23.0%.

Conclusion

Analyst estimates remained unchanged in the run up to the earnings release. The average estimate was 50 cents when the company reported.

We note that Diodes Inc. has consistently exceeded estimates over the past year or so. The average surprise in the preceding 4 quarters is a positive 9.48%, and another positive surprise was therefore expected.

The company faces competition from Fairchild Semiconductor International Inc. (FCS) and International Rectifier Corporation (IRF).

Diodes is currently a Zacks #2 Rank, which translates into a Buy on a short-term basis. We have a Neutral recommendation on a long-term basis.