Cree Reports Strong Earnings, Shares Pop

Cree, Inc. CREE, the market leader in LED lighting, reported fiscal second quarter earnings Tuesday that missed analysts estimates on stronger than expected revenue and shares spiked higher after-hours. Also, the company reported future guidance which contributed to the pop in shares.

For the fiscal second quarter of 2013, Cree reported EPS of $0.28, less than the $0.30 per share estimate, however revenue beat estimates in the quarter, with sales totaling $346.3 million in the quarter, better than the analyst estimate of $331.2 million. Compared to the same period a year ago, net income increased 69 percent and revenue increased 14 percent.

Despite the bottom line miss, shares rose on the strong guidance from management. Cree sees third quarter EPS between $0.30 and $0.35 and revenue between $325.0 and $345.0 million.

"Fiscal Q2 was another strong quarter with record revenue and earnings per share that were higher than our target range due to stronger sales in both LEDs and Lighting combined with improved gross margins," stated Chuck Swoboda, Cree Chairman and CEO. "Overall company backlog is in line with seasonal trends for our fiscal Q3. Longer term, we remain focused on driving adoption through innovation, and with our broad understanding of the technology levers from materials through systems, we see opportunities to move the market even faster than what has been experienced to date."

Notably in the press release, the company pointed out that gross margins expanded in the quarter and the company's cash position improved. Gross margins increased 170 basis points to 39.2 percent and the company's cash increased $69.5 million to $885.8 million. However, inventory increased slightly and accounts receivable decreased.

Cree shares rallied sharply after the close with shares popping 14.7 percent to $38.29 after closing at $33.47. The strong revenue and guidance figures alleviated investor fears over future performance and shares rallied despite the slight EPS miss. Investors now await the start of the conference call to listen to management's thoughts on the quarter later Tuesday.