Piper Jaffray Downgrades Ultra Clean Holdings To Neutral Following Earnings Report

Ultra Clean Holdings UCTT reported Q4 EPS of $0.17 on $120.3M in revenue, below Piper Jaffray's $0.26 on $112M estimates, and excluding the impact of a higher than expected tax rate, the company missed Piper's estimate by $0.06. The lower than expected earnings were driven by lower gross margin of 12.3%, 170 bps below Piper's model. Margin expansion was an underpinning of Piper's investment thesis and it is unfolding slower than modeled. Shares are now fully valued, in Piper's opinion, even though this is the second consecutive quarter of missed estimates. Piper is rolling out CY12 estimates that are effectively in line with prior CY11 estimates. While there is a case to be made for the company getting back on track, without more confidence to push estimates higher in CY12, Piper believes shares will be in the penalty box until execution issues are resolved. Piper Jaffray is downgrading UCTT to Neutral and has a $13.50 PT on UCTT UCTT closed Monday at $13.18