Ultra Clean boosted by increasing demand from artificial intelligence, self driving cars and the Internet of Things


Ultra Clean Holdings (UCTT),  a leading developer and supplier to the semiconductor capital equipment industry, reported Q1 earnings last Wednesday with top and bottom line beats as revenues grew 82% from last year to $204.6 million. Semiconductor revenue increased 80% and revenue from outside the U.S. rose 115% year-over-year.   EPS of $0.47 reversed a loss in the previous year and beat estimates by $0.05.

The results come as demand for semiconductor wafer processing equipment remains extremely strong. However the difference between the current cycle and previous cycles is that there is not just one technology transition driving the industry’s long-term investment cycle. Instead, the industry is becoming far more diverse as the world requires semiconductors in virtually every aspect of life. The common factor that is driving the need for all these chips across multiple applications is data.

Looking forward there is no sign that demand is likely to weaken.  From artificial intelligence to self driving cars to the Internet of things there is an increasing proliferation of chips and sensors which feed into Logic, processing, big data, storage, and the whole infrastructure required to support its use. When you put it all together there are multiple technology trends developing over the next few years that are likely to strengthen the semiconductor wafer processing market and provide much more balanced demand going forward.

Ultra Clean issued guidance for the second quarter for revenue of between $210 million and $220 million and adjusted EPS of between $0.49 and $0.55. Both ranges were well above consensus forecast estimates for revenue of $183.3 million and adjusted EPS of $0.33.  Trading on a TTM PE of 25.25 but only 12.06 times current year estimates the stock looks very good value.


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Disclosure: The author holds no positions in any of the stocks mentioned nor has any intentions to initiate any in the next 72 hours.