Q3 Preview: Cree (CREE) Looks to Beat as Expectations Abysmal

Cree Inc. (NASDAQ: CREE) shares are down 5 cents to $41.22 in late trade Monday heading into the company's third-quarter earnings report, scheduled after the closing bell Tuesday.

The semiconductor materials manufacturer is expected to report third-quarter earnings of $0.29 per share on sales of $217.43 million.

In the second-quarter, Cree posted earnings of $0.55 per share, 3 cents below the analyst estimate. The company reported revenue of $256.98 million last quarter, also missing the Street's view of $276.6 million.

Since the start of the first quarter, shares of Cree are down $21.49 or 34.27 percent. Over the last year the stock is down $40.90 or 49.81 percent.

Cree currently trades at a forward P/E of 21.91x full year analyst estimates.

Data from Bloomberg shows 17 analysts have a Buy rating on the stock, 8 have a Hold and 4 have a Sell. The average analyst price target on Cree is $56.10 with a target range of $35 to $100.

Analyst Comments:

• Deutsche Bank maintains a Hold rating on Cree with a $45 price target. The firm says, "Cree’s valuation is supported by its strong competitive positioning and the long-term potential for LEDs in general lighting. Upside risks include faster-than-expected adoption of LED lighting and improved GMs; downside risks include increased competition and slower than expected LED adoption in general lighting."
  
  
• Brigantine Advisors maintains a Sell rating on Cree with a $35 price target. "We think there are likely to be few surprises when Cree reports actual results next week and numbers could possibly come at the upper end of the new guidance as management may have sought to set the bar low. However, we believe that outlook for the June quarter is likely to be cautious, especially for gross margins."
  
  
• Kaufman Bros. maintains a Hold rating and $40 price target on Cree. "While we believe that the LED industry is still in the early stages of a secular growth story and its end markets are relatively immature (especially as it concerns street lighting and general lighting), weakening demand and pricing pressure are also the likely culprits for CREE's lowered expectations. We believe that CREE likely incurred price declines in the range of 15%-20%, which it could not fully offset with cost reductions in the quarter."
  
  
• JPMorgan maintains an Overweight rating and $62 price target on Cree. "We believe the developing distribution channel to a growing number of relatively small and new LED lighting product makers is making it more difficult to pin down specific demand levels. We expect LED demand forecasting risk to both the downside and upside until we see some clear leaders in LED lighting products emerge in the various regions."
  
  
• D.A. Davidson maintains a Buy rating and $56 price target on the stock. "We had argued that, based on historical seasonality (March quarter has consistently been the bottom over the past five years) and some of the anecdotal data points from various industry sources, we expected the LED industry to bottom in the March quarter."

---

Serious News for Serious Traders! Try StreetInsider.com Premium Free!

---

You May Also Be Interested In

• North American Construction (NOA) Tops Q2 EPS by 9c; Offers Guidance
• Marchex (MCHX) Reports In-Line Q2 EPS
• Nortech Systems, Inc. (NSYS) Tops Q2 EPS by 11c