Vishay's margins are rising. Its cash forecast points the other way.
Stronger demand and factory output lift profit margins. The next quarter brings a planned reversal in cash generation.
Vishay's profit margin moved beyond the target it set in August, and the component maker expects another improvement in the fourth quarter. Higher sales volumes and prices are helping its factories turn stronger demand into earnings.
Research by Ticker Byline shows that the third-quarter gross margin reached 25.5%, above the 23.5% to 24.5% forecast Vishay set in August. The new fourth-quarter range is 25.5% to 26.5%.
The recovery reaches earnings
Revenue of $978.9 million was slightly above the $975 million upper end of the earlier forecast. Operating profit reached $92.2 million from $19.1 million a year earlier. Management attributed the margin improvement to higher volumes, manufacturing efficiencies and pricing, partly offset by more expensive metals and materials.
Vishay makes semiconductors and passive components used in industrial equipment, vehicles and other electronics. Its quarter-end order backlog rose to the equivalent of 6.6 months of sales from 6.1 months at the end of the previous quarter. Orders still exceeded shipments, although that ratio eased.
Net income was $59 million, compared with a $7.9 million loss a year earlier. The older result included a tax-law charge; on the company's adjusted basis, earnings per share increased to 37 cents from 4 cents.
A stronger sales outlook, with a cash reversal ahead
The company forecasts fourth-quarter revenue of $975 million to $1.005 billion. The recovery was already under way in the summer: excluding tariff refunds passed to customers, second-quarter revenue was $918.6 million.
Quarterly operating cash flow reached $145.8 million. Vishay's free-cash measure, after capital spending and including proceeds from asset sales, was $98.5 million, up from $10.3 million in the previous quarter. Lower capital spending contributed to that improvement.
The quarterly report also sets out a reversal ahead: management expects negative fourth-quarter free cash flow as it significantly reduces its receivables-securitization program. Vishay sells some unpaid customer invoices to get cash sooner. Scaling that program back leaves more cash tied up while it waits for customers to pay.
The Vishay profile follows the capacity investments, July share offering and cash obligations behind the operating recovery.