Bull Of The Day: Cree

Sometimes, companies can experience a dramatic turnaround in a short time frame and go from being losers to top portfolio selections. That has been especially the case with Cree (CREE - Snapshot Report), a stock that was once a bear of the day in late October of 2014 that has managed to turn its business around to start 2015.

In fact, CREE shares underperformed the market after the bear of the day article and the stock was on rocky footing to start the year. However, YTD CREE shares have soared thanks to a promising earnings report in January which is leading to a positive outlook for the rest of the year too.

CREE Earnings 

While the latest earnings report was basically in-line and revenues were flat when compared to the year ago time frame, investors really keyed in on the firm’s outlook. Income was projected to be ahead of Wall Street estimates for the coming quarter, while revenues are also looking up too. Plus, with higher margins seen thanks to a better LED (light-emitting diode) business, prospects are looking bright for CREE in the near term.

Thanks to this, analysts have been raising their estimates for CREE earnings for both the current year and next year time frames. And not a single analyst has pushed their estimates slower for Cree’s earnings, as three estimates have gone higher for both time frames in the past thirty days.

This has translated into a rise for the consensus estimate for both time periods too, as the current year estimate has gone from $0.57/share 30 days ago to $0.62/share today. Meanwhile, for the next year time frame, we have seen the consensus go from $0.92/share to $0.96/share, which would be 54% EPS growth (y/y).



Zacks Rank

With this positive sentiment surrounding CREE and the recent boost in earnings estimates, it shouldn’t be a surprise to note that CREE has earned itself a Zacks Rank #1 (Strong Buy). That means that we are looking for more outperformance from the company in the near term and expect the recent run for this small cap stock to continue.

And if that wasn’t enough for investors, it is important to note that Cree’s industry currently has a Zacks Industry Rank in the top 20% overall. A rising tide tends to lift all boats, and an industry that is well-positioned can help to lift stocks even without impressive company specific fundamentals.

Bottom Line

Cree finds itself as a key player in the quickly growing LED market and it has managed to establish a nice corner of the market. And despite intense competition, the firm has actually seen some margin improvements, which is a great sign for their longer-term hopes.

This is particularly true given that they are raising their earnings and revenue outlooks and that analysts agree with this positive sentiment. So if you haven’t looked at CREE in a while for your portfolio, now might be the time for a second glance as the company is clearly in turnaround mode and could go higher from here if current trends continue.