Ultra Clean Holdings Inc. - Value

Ultra Clean Holdings (UCTT) has put together a strong surprise streak, having beaten the Zacks Consensus the last 5 quarters.

Ultra Clean Holdings offers outsource solutions for complex modules involving everything from liquid & gas delivery systems to turnkey system integration.

Headquartered in California, it has manufacturing facilities in Austin, Portland, Singapore and Shanghai.

Its customers are mainly original equipment manufacturers in the semiconductor, flat panel, energy and medical industries.

Ultra Clean Surprised By 25% in the Second Quarter

On July 26, Ultra Clean reported its second quarter results which beat the Zacks Consensus by 5 cents. Earnings per share were 25 cents compared to the consensus of 20 cents.

It's been quite the turnaround compared to 2009. Ultra Clean lost 66 cents per share in the year ago period.

Revenue rose 355.4% to $105.9 million from the second quarter of 2009. It was also 7.5% higher than the first quarter of the year.

The company saw continued growth in the semiconductor capital equipment market.

Third Quarter Outlook

Ultra Clean expects continued expansion in its gross margin for the rest of 2010 as it improves manufacturing efficiencies in its Shanghai and Singapore facilities.

It is very bullish about the third quarter, projecting record revenue and earnings.

Revenue guidance is between $118 million and $123 million. Earnings per share are expected in the range of 29 to 33 cents.

Zacks Consensus Estimates Climb

Not surprisingly, given the company's guidance, since the earnings results the third quarter Zacks Consensus Estimate has jumped to 31 cents from 20 cents. This is in the middle of the company's guidance range.

The full year has climbed 27% to $1.04 per share in the last 60 days. This is earnings growth of 308.7% as the company lost 50 cents a share in 2009.

The earnings growth is expected to continue into 2011. Earnings are forecast to grow 40% to $1.47 per share.

Ultra Clean is scheduled to report third quarter results on Oct 25.

How Cheap Is It?

Ultra Clean is trading at just 8x forward estimates. This is certainly in the range of a value stock and it is slightly under its peers at 8.4x.

Its price-to-book ratio is 2.5, also within the value parameters.

The company's return on equity is a stellar 15.5%, which blows by its peers at 6.4%.

Ultra Clean Holdings is a Zacks #1 Rank (strong buy) stock.

Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor in charge of the market-beating Zacks Value Trader service. You can follow her at twitter.com/traceyryniec.

 
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