Cree shares rise on fiscal 1Q and 2Q outlook

NEW YORK -- Shares of Cree Inc. jumped Wednesday after the LED product maker reported solid fiscal first-quarter results and offered a second-quarter forecast close to Wall Street estimates.

THE SPARK: Cree reported its fiscal first-quarter results after the market closed on Tuesday. The light-emitting diode products maker said net income rose 26 percent in the first quarter, to $16.1 million, or 14 cents per share. Excluding one-time charges Cree said it earned 27 cents per share. Revenue rose 17 percent to $315.8 million.

Analysts expected the company to report adjusted net income of 26 cents per share and $317.5 million in revenue, according to FactSet.

The company's fiscal first quarter ended Sept. 23.

THE BIG PICTURE: Cree said its backlog of orders grew over the last three months even though its visibility into future demand is limited and economic conditions remain difficult. In the fiscal second quarter Cree expects adjusted income of 27 to 31 cents per share and $320 million to $340 million in revenue.

Analysts expected net income of 30 cents per share and $331.7 million in revenue on average.

THE ANALYSIS: Analysts said the results were solid, but they were less enthusiastic about them than some investors. Caris & Co. analyst Ben Pang said Cree's profit margins improved and that the company's strategy is working, but he added that its revenue remains "sluggish."

Raymond James analyst Hans Mosesmann said Cree "showed progress on a number of fronts but did little to address long-term concerns" because of broader problems in the LED market that hurt its profitability. He said almost all of the company's growth came from a recent acquisition, which makes the improved revenue less impressive than it may seem.

Pang rates Cree shares "Average" with a price target of $26 per share while Mosesmann kept an "Underperform" rating on them.

SHARE ACTION: Cree shares rose $3.26, or 12.5 percent, to $29.45 in afternoon trading. The stock is down 19.8 percent since May 9.