Bloomberg News

Cree Plunges After Forecast Falls Below Analysts’ Estimates

October 19, 2011

(Updates with closing share price in second paragraph.)

Oct. 19 (Bloomberg) -- Cree Inc., a maker of energy- efficient lighting products, fell the most in nine months after saying earnings and gross margin this quarter will be below analysts’ estimates.

Shares of the Durham, North Carolina-based company declined 12 percent to $24.31 in New York, the biggest loss since Jan. 19.

Earnings in the fiscal second quarter will be 25 cents to 28 cents, excluding stock-based compensation, inventory acquired in the August purchase of Ruud Lighting Inc. and other one-time items, Cree said in statement yesterday. Analysts had expected 33 cents, the average of 27 estimates compiled by Bloomberg. Gross margin will be 37 to 38 percent, below the 38.5 percent analysts had expected.

Cree is facing low demand and pricing pressure for the company’s light-emitting diodes, and factory utilization remains low. As long as the global economy remains weak, it may be difficult for Cree to convince consumers to purchase more- expensive lighting products, said Jeffrey Bencik, an analyst at Kaufman Brothers in New York.

“With the overall global economy in a seriously compromised situation, you don’t have consumers willing to spend even $25 on an LED light,” Bencik said. He lowered his price target for Cree to $19 from $23 and has a “sell” rating on the shares and owns none.

In the first fiscal quarter ended Sept. 25, Cree reported revenue of $269 million, compared with $268 million a year earlier. Net income was $12.8 million, or 11 cents a share. Earnings excluding certain items were 25 cents a share, compared with 60 cents a year earlier.

--Editors: Will Wade, Jessica Resnick-Ault

To contact the reporter on this story: Zachary Tracer in New York at ztracer1@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net


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