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Diodes and Steelcase highlighted as Zacks Bull and Bear of the Day

For Immediate Release

Chicago, IL – July 05, 2017 –Zacks Equity Research Diodes Inc. (NASDAQ: DIOD Free Report ) as the Bull of the Day, Steelcase Inc. (NYSE: SCS Free Report ) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on various companies.

Here is a synopsis of all two stocks:

Bull of the Day :

The semiconductor industry has been one of the best performing market segments in 2017, and our Zacks Bull of the Day,Diodes Inc. (NASDAQ: DIOD Free Report ) has exposure to several sub segments within the broader semiconductor industry. This diversity gives Diodes Inc. the ability to capitalize on the increasingly improving market conditions within the technology industry.

This Zacks Rank #1 (Strong Buy) is a leading manufacturer and supplier of high-quality discrete and analog semiconductor products, primarily to the communications, computing, industrial, consumer electronics and automotive markets. The Company's corporate sales, marketing, engineering and logistics headquarters is located in Southern California, with two manufacturing facilities in Shanghai, China, a wafer fabrication plant in Kansas City, Missouri, engineering, sales, warehouse and logistics offices in Taipei, Taiwan and Hong Kong, and sales and support offices throughout the world.

Recent Earnings Report

In their most recent reported quarter, Q1 17 the company beat both the Zacks consensus earnings and revenue estimates. Specifically, management reported year over year gains in revenues +6.1%, GAAP gross profit +15.1%, and Non-GAAP adjusted net income per diluted share +16.7%. Further, the company achieved $45.6 million of cash flow from operations, and $26.5 million in free cash flow while paying down $11.0 million in long-term debt.

Management’s Take

According to Dr. Keh-Shew Lu, President and Chief Executive Officer, “ Revenue in the quarter was at the high end of guidance, increasing almost 2 percent sequentially as compared to typical seasonality of down about 5 percent. Sales in Europe were particularly strong with a resurgence in revenue from the industrial market, combined with strengthening demand in North America. Additionally, our automotive revenue continued to grow from the record level achieved last year, resulting in growth of almost 25 percent over the prior year quarter. Also notable in the quarter, gross margin exceeded our guidance and surpassed 31 percent. The improvement was due to increased loading at our manufacturing facilities as a result of the stronger business environment as well as better pricing, in particular for analog products acquired from Pericom. Our KFAB facility is up and running with stabilized monthly output attained in March .”

Looking forward, Dr. Keh-Shew Lu stated, “ As we look to the second quarter, our business as well as the overall market are showing signs of continued strength, resulting in our expectation of 10 percent sequential growth and 33 percent non-GAAP gross margin at the mid-point. With a broadened product portfolio and an expanded sales channel following our integration of Pericom, we are well positioned to fully capitalize on these improving market conditions .”

Increasing Earnings Estimates

Over the past 30 days, we have seen earnings estimates for Q2 17, Q3 17, FY 17 and FY 18 all improve; Q2 17 rose from $0.28 to $0.36, Q3 improved from $0.34 to $0.43, FY 17 jumped up from $1.00 to $1.25, and FY 18 was lifted from $1.38 to $1.50.

Bottom Line

Diodes exposure to the communications, computing, industrial, consumer electronics and automotive markets give it a multitude of areas for growth. Further, with the integration of Pericom, we should expect to see sales blossom through 2018.

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Bear of the Day :

When a management team decides to invest in product development and sale and marketing initiatives it is intended to help overall revenues in the future, but this long term vision at times mutes near term earnings. This is the situation facing our Zacks Bear of the Day,Steelcase Inc. (NYSE: SCS Free Report ).

This Zacks Rank #5 (Strong Sell) company is a designer and manufacturer of products used to create high-performance work environments. Its product portfolio includes furniture systems, seating, storage, desks, casegoods, interior architectural products, technology products and related products and services. The company reports two geographic furniture segments: North America and International.

Recent Earnings Results

Management posted Q1 18 earnings on June 21 where they missed both the Zacks consensus earnings and revenue estimates. In their America’s segment, they saw year over year changes in revenues -2.8%, orders -3%, and SG&A as a percentage of sales increased from +24.7% to +26.2%. Management cited “increased investment in product development and sales & marketing” as the cause of the increased costs. In their EMEA (Europe, Middle East and Africa) segment year over year revenues dropped by -9.7%, and posted a normalized operating loss of -$8.6 million.

Management’s Take

According to Jim Keane, president and CEO, “ Our industry is changing as customers begin to adopt dramatically different spaces that support new ways of working," said Jim Keane. "We expect to increase our investments in new products and partnerships relevant to their emerging needs. These investments are intended to help us broaden our addressable market and create new growth opportunities for the future. The success of the products we launched in recent years, and the awards and other recognition we earned at the Neocon trade show give us confidence that customers and influencers agree we are on the right track .”

Declining Earnings Estimates

After the disappointing Q1 results, earnings estimates for Q2 18, Q3 18, FY 18 and FY 19 all saw reductions over the past two weeks; Q2 18 dropped from $0.38 to $0.23, Q3 18 fell from $0.34 to $0.27, FY 18 declined from $1.22 to $0.95, and FY 19 was trimmed from $1.37 to $1.10.

Bottom Line

While management’s plans to improve their line of products looks as it will pay off in the long term; the short term out-look for the company is choppy at best.

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About the Bull and Bear of the Day

Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.

About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous analyst coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

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Diodes Incorporated (DIOD): Free Stock Analysis Report
 
Steelcase Inc. (SCS): Free Stock Analysis Report
 
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