Ultra Clean Holdings, Inc. (UCTT) recently hit a new multi-year high after the company reported better than expected Q1 results in late April that included a 31% earnings surprise. With a forward P/E of 12X, shares trade at a discount to the market and its industry peers.
Company Description
Ultra Clean Holdings, Inc. develops subsystems and products for original equipment manufacturers of semiconductor capital equipment worldwide. The company was founded in 1991 and has a market cap of $208 million.
Ultra Clean’s business took a pretty big hit in the recessionary environment of 2008 and 2009 after posting a few years of exceptional revenue and earnings growth as many companies chose to scale back on capital spending. But with the economy on the mend, Ultra is beginning to bounce back, on display when the company reported better than expected Q1 results on April 26.
First-Quarter Results
Revenue for the period was up substantially from last year, jumping 35% to $98.5 million. Earnings also came in strong at 17 cents, 31% ahead of the Zacks Consensus Estimate. Ultra has been easily exceeding analyst expectations over the last year with an average earnings surprise of 69%.
The company also scored some points on the expense management front, with gross margin increasing to 12.6% from 11.6%. Ultra is confident that the trend will continue, saying that, “We expect to expand our gross margin as a percent of revenue during the balance of the year through improved manufacturing efficiencies and increased utilization of our Shanghai and Singapore facilities.”
Strong Balance Sheet
Ultra Clean also has a solid balance sheet, with cash and equivalents of $28 million and long-term debt of just $17 million.
Estimates
The analysts were encouraged by the great quarter, with estimates jumping higher on the solid earnings surprise and optimistic view. The current year added 16 cents to 82 cents while the next year added 11 cents to $1.26, a bullish 54% earnings surprise.
Not only does UCTT have a very nice quarter in the bag with a bullish growth projection to boot, but it also has value, trading with a forward P/E multiple of 12X, a nice discount to its industry peer’s 15X.
The Chart
UCTT has been rallying off the good quarter, with shares recently hitting a new multi-year high at $10.75 after trending higher for most of the last 14 months. Look for support from the trend line and the previous breakout area on any weakness, take a look below.
Michael Vodicka is the Momentum Stock Strategist for Zacks.com. He is also the Editor in charge of the market-beating Zacks Surprise Trader Service. Zacks Investment Research
