Diodes Incorporated (DIOD) has provided an update on its third-quarter of fiscal 2014 guidance. The company now expects revenues to come within the $230 million and $238 million range versus the previous expectation of $228 million to $238 million set forth during its second-quarter conference call. The Zacks Consensus Estimate is pegged at $234.0 million.
Gross margin is expected to be approximately 32% (-/+1%), up from the previous guidance of 31.8% (-/+2%). Diodes has reiterated its operating expenses guidance for the third quarter and expects it to be 21% of total revenue (-/+1%). The income tax rate is expected to be 22% (-/+3%). Moreover, the company expects its share count to be approximately 48.8 million.
The current revenue guidance of $230 to $238 million reflects a 3% to 6.6% sequential increase. In the second quarter of fiscal 2014, Diodes reported revenues of $223.2 million, up 4.1% year over year due to better-than-expected growth in industrial end markets, aided by favorable product mix in North America and Europe.
The company reported adjusted earnings of 38 cents per share in the last reported quarter, which not only beat the Zacks Consensus Estimate by a penny but also increased 15.2% on a year-over-year basis.
Our Take
The upward revision in guidance is primarily driven by the positive impact from the BCD Semiconductor acquisition coupled with favorable product mix and better capacity utilization.
The BCD Semiconductor acquisition is benefiting Diodes by expanding its footprint in the broader analog market and extending its product offerings. We believe that the company’s product launches and product refreshes will boost revenues, going forward.
However, competition from the likes of Fairchild Semiconductor International Inc. (FCS) and ON Semiconductor Corp. (ONNN) remains a concern for the company.
Currently, Diodes has a Zacks Rank #3 (Hold).
Investors can also consider Micron Technology (MU), which has a Zacks Rank #1 (Strong Buy) and is worth buying.
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