Kulicke and Soffa Industries Down to Strong Sell on Weak Q4 - Analyst Blog

Zacks Investment Research downgraded Kulicke and Soffa Industries, Inc. (KLIC) to a Zacks Rank #5 (Strong Sell) on Nov 25, 2014. Going by the Zacks model, companies holding a Zacks Rank #5 have strong chances of performing worse than the broader market.

Why the Downgrade?

Shares of Kulicke and Soffa Industries have fallen 3.2% since the company reported weaker-than-expected results for fourth-quarter fiscal 2014 (ended Sep 27, 2014) on Nov 6. Disappointment over results was also evident from downward revision in earnings estimates by brokerage firms. A brief discussion on the quarter's result has been provided below:

Kulicke and Soffa Industries' earnings came in at 38 cents per share, down 2.6% year over year and 9.5% below the Zacks Consensus Estimate of 42 cents per share. Revenue growth of 12.2% was partially offset by a 10.2% increase in cost of sales. Gross margin grew 90 basis points (bps) to 47.4%. Operating expenses expanded 18.9% year over year, reducing operating margin by 60 bps to 19.3%.

For first-quarter fiscal 2015, Kulicke and Soffa Industries expects revenues in a range of $90−$100 million, lower than $195 million recorded in fourth-quarter fiscal 2014.

Dismal fourth-quarter fiscal 2014 performance as well as weak revenue outlook has made investors dubious about Kulicke and Soffa Industries' performance in the future. Over the last 30 days, the Zacks Consensus Estimate has dropped 14.4% to 83 cents per share for fiscal 2015, while the same is pegged at 95 cents per share for fiscal 2016.

Other Stocks to Consider
 
Kulicke and Soffa Industries currently has a $1.1 billion market capitalization. Some better-ranked stocks in the machinery industry include MKS Instruments, Inc. (MKSI), Rudolph Technologies Inc. (RTEC) and Tessera Technologies Inc. (TSRA). All these stocks sport a Zacks Rank #1 (Strong Buy).