Register  |  Login

Power-One Inc.: Healthy Results Support our Trough View

Overall, we believe Power-One’s second consecutive better-than-expected quarter and healthy near-term guidance supports our view that 1H12 is likely to serve as a trough for the company.

Toolbox

Flag this item Connections
Print May 4, 2012, 14:43 (CEST)
text size: T T

Read the full report »

Stock Rating/Sector View: 1-Overweight/2-Neutral
Price Target: USD 6.00
Price (03-May-2012): USD 4.43
Potential Upside/Downside: +35%
Tickers: PWER

Overall, we believe Power-One's second consecutive better-than-expected quarter and healthy near-term guidance supports our view that 1H12 is likely to serve as a trough for the company. While demand was certainly - and expected to be - influenced by pull-through demand in Europe, continued growth in key markets such as North America suggests steady progress towards ongoing geographic diversification. We modify our estimates and retain our relative 1-Overweight rating.

Pull-Forward Demand Drives 1Q Upside: PWER reported revenues of $226mn, above our $200mn and consensus' $204mn estimate. Revenues above management's guidance of $190-$210mn were expectedly driven from pull-forward demand in Europe ahead of expected tariff cuts, although North American penetration continues to gain traction.

Sequential GM Dip Expected, Although Higher Tax Saps EPS Upside: Gross margins of 24.4% fell just shy of our 25.0% estimate on a mix of ASP declines, lower-than-expected factory volumes and higher costs associated with PWER's service footprint build-out. Though opex was broadly in-line with expectations, a higher-than-expected tax - from higher EU demand - clipped bottom-line upside from sales outperformance yielding PF EPS of $0.07, in line with our estimate of $0.07 and just below the street's $0.08.

Near-Term Guidance Paints an Improving Picture; 2H Bears Monitoring: 2Q revenue guidance of $240-$260mn (+6-15% q/q) was well ahead of expectations as near-term European strength is expected to continue. Coupled with expectations of improving gross margins lends support to our view that 1Q12 is likely to serve as a trough for the company. Demand in 2H from legacy (ie, Germany and Italy) and new (ie, U.S. and India) bears monitoring, however, as the company looks to crisply execute on a number of fronts (new product introduction, geographic expansion). We modify our 2012 and 2013 estimates and maintain our relative 1-Overweight rating.

Barclays Capital Inc. and/or one of its affiliates does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.

Investors should consider this communication as only a single factor in making their investment decision.

For analyst certifications and important disclosures including, where applicable, foreign affiliate disclosures, please refer to the full document(s) contained or included in the link within this email.

>> Source
blog comments powered by Disqus