November 13, 2019 / 11:21 AM / 24 days ago

UPDATE 1-TowerJazz shares fall after revenue outlook disappoints

(Adds details, CEO/analyst comment, share reaction)

By Steven Scheer

TEL AVIV, Nov 13 (Reuters) - Israeli chip manufacturer TowerJazz’s forecast for fourth-quarter sales came in lower than market expectations, sending its shares down sharply on Wednesday.

TowerJazz, which makes analogue chips used in cars, medical sensors and power management, reported third-quarter earnings roughly in line with analysts forecasts, but also said fourth-quarter revenue would be in a range of 5% above or below $312 million.

“Fourth quarter sales guidance (was) slightly below expectations,” said Credit Suisse analyst Quang Tung Le, noting that a midpoint of $312 million in revenue would be 7% below a year ago and as well as lower than analysts’ expectations.

The company’s shares slid 8% in Tel Aviv. Despite the drop, TowerJazz’s shares are up 56% so far in 2019.

TowerJazz reported diluted earnings per share, excluding one-time items of 25 cents for the third quarter, down from 37 cents a year earlier.

Revenue fell to $312 million from $323 million the quarter due to a new Panasonic contract signed earlier this year that will see quarterly revenue fall by $20 million, while also weighing on profit.

Revenue was driven by growth in the mobile sector.

TowerJazz was forecast to earn adjusted EPS of 24 cents on revenue of $312 million, according to I/B/E/S data from Refinitiv.

“It was a very, very stable and strong quarter for us where we able to work through the fact there are some specific markets that are weak that we serve very strongly but we still have organic growth,” Chief Executive Russell Ellwanger said.

TowerJazz in July decided to expand capacity for power management and image sensor platforms, at an investment of $100 million, due to a forecast for customer demand to exceed capacity at its joint venture with Panasonic in Japan.

Ellwanger said the project should be completed by the end of the first half of 2020.

“You should see a ramp up in production in the second quarter and stronger in the third quarter. By the end of the third quarter you will be able to see a steady increase in revenue,” he told Reuters. “We are very optimistic for a strong 2020.”

Analysts expect revenue to grow to $1.33 billion in 2020 from about $1.25 billion this year. (Additional reporting by Tova Cohen. Editing by Jane Merriman)

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