Why Ultra Clean Holdings (UCTT) Hit a One-Year High Today

NEW YORK (TheStreet) -- Ultra Clean Holdings  (UCTT) hit a one-year high of $13.88 as of 1:20 p.m. on Wednesday after the company, which creates subsystems and supplies them to the semiconductor industry, reported fourth-quarter results and issued first-quarter guidance that surpassed expectations.

Ultra Clean reported adjusted earnings per share of 26 cents and revenue of $126.3 million, which beat analysts' expectations of 23 cents per share on revenue of $125.68 million. The company also announced it expects adjusted EPS of 28 cents to 31 cents and revenue of $135 million to $140 million in the first quarter. This beat analysts' expectations of 21 cents per share on revenue of $122.4 million.

In the wake of the results, Stifel Nicolaus raised its target price on Ultra Clean Holdings to $15 from $13 and kept its "buy" rating. The firm expects the company's earnings growth to increase rapidly. Northland Securities also raised its target price to $17 from $9 and kept its "outperform" rating.

Must ReadUltra Clean Achieves ISO 13485:2003 Registration

TheStreet Ratings team rates ULTRA CLEAN HOLDINGS INC as a "hold" with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate ULTRA CLEAN HOLDINGS INC (UCTT) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in net income and growth in earnings per share. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, poor profit margins and weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • UCTT's revenue growth has slightly outpaced the industry average of 5.5%. Since the same quarter one year prior, revenues slightly increased by 6.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Semiconductors & Semiconductor Equipment industry. The net income increased by 282.4% when compared to the same quarter one year prior, rising from -$1.12 million to $2.05 million.
  • ULTRA CLEAN HOLDINGS INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, ULTRA CLEAN HOLDINGS INC reported lower earnings of $0.22 versus $1.03 in the prior year. This year, the market expects an improvement in earnings ($0.51 versus $0.22).
  • The gross profit margin for ULTRA CLEAN HOLDINGS INC is rather low; currently it is at 16.95%. Regardless of UCTT's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, UCTT's net profit margin of 1.91% is significantly lower than the industry average.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, ULTRA CLEAN HOLDINGS INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • You can view the full analysis from the report here: UCTT Ratings Report

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