Earnings estimates for ANADIGICS, Inc. (ANAD) have been slashed by most analysts covering the stock after the company provided disappointing guidance for the first quarter of 2011.
ANADIGICS projects sales of around $42 million – $44 million in the first quarter of 2011, much below the Zacks Consensus Estimate of $55 million. Excluding one-time charges and stock-based compensation, ANADIGICS projects EPS around $0.07 – $0.08.
FOURTH QUARTER FLASHBACK
ANADIGICS reported net sales of $60.2 million in the fourth quarter of 2010, down 1.7% sequentially but up 44.1% year over year. The results beat management’s guidance of $57 million – $58 million and the Zacks Consensus Estimate of $58 million.
Net income came in at $3.4 million or $0.05 per share in the fourth quarter. Excluding one-time charges, but including stock-based compensation expense, net income came in at $0.04 per share, better than the Zacks Consensus Estimate of $0.02.
AGREEMENT IN ESTIMATE REVISIONS
There is strong consensus among analysts covering the stock. Following the disappointing guidance provided by management, all the four analysts covering ANADIGICS cut their earnings estimates for 2011 putting a downward pressure on the estimates.
For the first quarter as well, all the four analysts covering the stock slashed their estimates.
MAGNITUDE AGREEMENT OF ESTIMATE REVISIONS
Not only is there strong consensus in direction among analysts covering the stock, the change in magnitude is also noteworthy.
The current Zacks Consensus Estimate for 2011 is a loss of $0.05 per share, significantly down from the estimate of $0.17 per share, thirty days ago.
The current Zacks Consensus Estimate for the first quarter is a loss of $0.11 per share, down from the previous estimate of break-even earnings, thirty days ago.
ANADIGICS stated that the company has not lost any significant customer but experienced a soft combination of soft cable and WiMAX market which has strained inventories.
OUR TAKE
The key initiatives for ANADIGICS in 2011 will be to capitalize on the growth of 3G and 4G markets by introducing new superior products and improving operational efficiency, thereby achieving profitability.
The weakness in the revenue guidance was primarily due to weakness from Asia with normal seasonality in Korea and North America. Management believes that this is a short-term inventory correction and expects growth in the second half of 2011. Management expects to see a rebound in the second half of 2011 driven by contribution from new customers.
We prefer to be on sidelines till then and hence maintain a NEUTRAL recommendation on ANADIGICS. Our recommendation is supported by Zacks #3 Rank which translates to a short-term rating of Hold.
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