Wednesday’s Market Insights: Clean Diesel Technologies, Inc. (CDTI), Seagate Technology PLC (STX) and Cree, Inc. (CREE)

With too many press releases to keep track of, here’s a running tab of the updates which we find most relevant. Most important so far today are Clean Diesel Technologies, Inc. (NASDAQ:CDTI), Seagate Technology PLC (NASDAQ:STX), and Cree, Inc. (NASDAQ:CREE). Let’s take a closer look:

Clean Diesel Technologies, Inc.

Emission control system maker Clean Diesel has partnered with DENSO Products and Services Americas Inc., an affiliate of leading global automotive supplier DENSO Corp., to supply CDTi’s enabling technologies to the North American heavy-duty market. Under the scope of the partnership the two companies will launch PowerEdge diesel after-treatment, which will be distributed by DENSO and manufactured by CDTi featuring CDTi’s Diesel Particulate Filter (DPF) and Diesel Oxidation Catalyst (DOC) technologies.

Clean Diesel shares reacted to the news, jumping over 20% in Wednesday trading session.

“This partnership reflects our continued success in positioning CDTi as a provider of emissions solutions to the global automotive market,” stated Matthew Beale, CDTi’s CEO. “DENSO’s choice of CDTi provides further evidence of our growing technology leadership in the world’s largest heavy-duty markets. We are excited to add DENSO to our growing customer base of global manufacturing and distribution partners.”

“DENSO strives to provide our customers with innovative products that contribute to the productivity of their businesses,” stated Frank Jenkins, senior manager of DENSO’s Heavy Duty Marketing Group, DENSO Products and Services Americas, Inc. “CDTi shares our commitment to product reliability and durability, rigorous safety and performance standards, innovation, customer service and environmental stewardship.”

“Partnering with DENSO supports our continued commercial momentum in the large, fast-growing opportunity for OE-quality after-treatment solutions in North America,” stated Jason P. Soika, CDTi’s Vice President, Sales & Marketing. “This agreement significantly expands our reach into the multi-million-dollar market for replacement DPFs and DOCs. In addition, being selected as a supplier for DENSO further validates the quality of our OEM replacement products.”

Seagate Technology PLC

Seagate reported solid results that largely beat consensus expectations, and issued positive guidance. The data storage giant posted December quarter revenue of $2.9 billion, above consensus estimates of $2.8 billion. In addition, Seagate expects March quarter revenues of $2.7 billion, above consensus prior estimates of $2.5 billion.

In reaction, BMO analyst Tim Long raised his price target for STX from $33 to $42, while reiterating a Market Perform rating.

Long noted, “It was a strong quarter for PC drives with notebook drives in particular exceeding expectations, while nearline/capacity shipments disappointed. Margins improved for a third consecutive quarter as management executed on its cost cutting strategy, which resulted in a meaningful beat on EPS. Near- and medium-term guidance was positive. We believe the performance should translate well to WDC, which reports earnings tomorrow.”

“We remain on the sidelines on STX shares, despite the recent success. While management is delivering well on right-sizing the business, we remain concerned about long-term over-exposure to HDDs. While the company is trying to move away from low-ASP/margin devices, the mix shift from enterprise to PCs in the quarter shows that market conditions can create headwinds to the strategy. We believe the company will be challenged to maintain earnings growth longer-term,” the analyst concluded.

Cree, Inc.

Cree beat Street expectations driven by contributions from its lawsuit settlement with Feit Electric and LED GM performance. The LED maker reported non-GAAP EPS from con’t. ops. of $0.20 on revenue of $347.0 million, compared to consensus estimates of $0.08 and $324.8 million respectively. Cree provided F3Q17 revenue from continuing operations guidance of $285-315 million and $340-370 million from disc’t ops compared to consensus expectations of $322.3 million.

Reacting to the earnings results, Cree shares rose over 9% to $29.96.

“We delivered very good results in fiscal Q2, as revenue and non-GAAP earnings were significantly above our targeted range due to the settlement of our patent infringement and false advertising lawsuit with Feit Electric,” stated Chuck Swoboda, Cree Chairman and CEO. “The fundamentals in our business have improved over the last several quarters, and we remain focused on building a larger and more valuable LED lighting company by bringing better light to our customers.”

Oppenheimer analyst Colin Rusch commented, “While we are encouraged by Lighting GM improvement, slower ad spending, and reduced working capital, we continue to believe uncertainty in infrastructure spending will prove a headwind for CREE over the next few quarters and believe LT growth depends on executing its Lighting M&A strategy, which is uncertain. We remain on the sidelines for now.”


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