cree earnings preview: cost cutting measures and commercial lighting business to boost profitability

by:DGT Lighting     2020-03-11
Leading LED manufacturer Cree (NYSE: CREE)
It plans to announce fiscal 2016 revenue for the second quarter on January 19 (
End of fiscal year June).
While the company expects its LED component business to remain weak in the coming quarters, it expects its lighting business to remain growing.
Cree expects its second-quarter revenue to be between $425 and $0. 445 billion, roughly flat compared to the same period last year.
However, the company believes that new products and lower costs brought about by the restructuring plan will help increase revenue and profitability in fiscal 2016.
Due to oversupply in the market and the shortage of LED backlight demand, LED prices dropped sharply by 30%, which seriously affected the profitability of Corey in 2015.
However, despite these brief
The long-term disadvantage of forcing many other companies out of the market is that the company managed to maintain a strong balance sheet with the remaining cash.
Next, Cree can rely on the rise in LED lighting penetration rate to offset the impact of the decline in LED profit margins.
Our price estimate for Cree $31 is about 20% higher than the current market price.
See our full analysis of Cree stocks
In order to adjust capacity, reduce overhead and increase LED reserves, Corey decided to restructure its LED business in the 2015 quarter.
As a result, the Company incurred a restructuring fee of $84 million in the fourth quarter of 2015, and a restructuring fee of $16 million in the first quarter of 2016.
The company\'s goal is to complete LED Restructuring and factory integration by the end of this quarter.
Once the restructuring is completed, the Corey LED business will benefit from the reduced cost structure.
With a low-cost structure, companies can earn additional market share by passing benefits to customers.
The growing momentum of the lighting business has locked its entire R & D effort into the rise of LED components and LED lighting.
Although the company has made significant progress in the volume and product base of the lighting business in the past few years, it believes that there is still a lot of untapped potential in terms of revenue and profitability.
The general shift in LED lighting in the lighting market is expected to be the main driver of growth in the LED industry.
The LED lighting market is expected to grow at a rate of 45% per year by 2019, due to rising interest in price points and channels to push LED products to consumers.
LED lighting is expected to account for 80% of the lighting market by 2020, creating a market of up to $94 billion.
The impact of China\'s economic slowdown on CreeCree is currently about 21% of revenue from China and is focused on expanding its presence in the market in the future.
China accounts for 30% of the global LED market and is the largest LED market in the world.
Aware of the growth potential of China\'s economy, Corey has significantly expanded its manufacturing facilities in China over the years.
However, the current slowdown in China\'s economy, mainly due to the slowdown in market demand for commodities, may also have a chain reaction to the semiconductor industry.
Nevertheless, since the semiconductor industry is driven primarily by new technological innovations in products, we expect the general shift in LED lighting to offset the impact of the economic slowdown.
Still, if it takes longer for the Chinese economy to recover, inventories of semiconductor companies such as Corey will increase and revenue growth in the region will slow.
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