Friday, February 4, 2011

Veeco Instruments Inc. (NASDAQ: VECO): Q4 Earnings Preview 2010

Veeco Instruments Inc. (NASDAQ: VECO) is scheduled to release its fourth-quarter financial results after the closing bell on Monday, February 7, 2011. Analysts, on average, expect the company to report earnings of $1.61 per share on revenue of $302.17 million. In the year ago quarter, the company reported earnings of 41 cents per share on revenue of $146.37 million.

Veeco Instruments Inc. designs, manufactures, markets and services enabling solutions for customers in the high brightness light emitting diode (HB LED), solar, data storage, scientific research, semiconductor and industrial markets. In its LED and Solar segment, Veeco designs and manufactures metal organic chemical vapor deposition systems that are used to make HB LEDs or solar cells made of III-V compound semiconductors. In its Data Storage segment, Veeco designs and manufactures equipment used in the production of thin film magnetic heads that read and write data on hard disk drives.

In the preceding third quarter, the Plainview, New York-based company's net income was $91.1 million, or $2.16 per share, from continuing operations, compared with $31,000, or breakeven per share, in the year-earlier quarter. On an adjusted basis, the company earned $1.46 per share in the latest quarter. Revenue jumped to $277.1 million, compared to $74.7 million a year-ago. Analysts, on average, expected the company to report earnings of $1.25 per share on revenue of $273.72 million.

At its last earnings call in October, Veeco said that it expects fourth-quarter revenue to be between $285 and $320 million. Earnings per share are currently forecasted to be between $1.96 to $2.35 on a GAAP basis and $1.46 to $1.74 on a non-GAAP basis. Analysts currently expect the compay to report third-quarter earnings of $1.47 per share on revenues of $274.69 million.

The LED industry has been growing rapidly, primarily due to the proliferation of LEDs in backlighting for TVs and notebook displays. The customer base (largely Korean, Taiwanese and Japanese) essentially stopped investing in new capacity during the downturn and has been playing catch up ever since. The Chinese government in particular is subsidizing 50% the purchase price of MOCVD tools in an effort to grow its domestic LED industry. The Chinese government is also stimulating demand by changing local building codes to mandate LEDs in street lights and commercial buildings in certain cities.

The biggest part of Veeco's business is the sale of their MOCVD machines to LED and solar cell manufacturers, based primarily in the Pacific Asia region. In China, there have been subsidies to manufacturing companies to help develop that industry in their region. However, shares of the company have been hit hard by talk of Chinese subsidies coming to an end. According to sources, the various Chinese subsidies are due to expire in mid 2011. For example, the Yangzhou Economic Development Zone provides a $1.5M subsidy for each machine purchased, which is due to expire on July 11, 2011.

Full Disclosure: None.
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