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IDT 4Q18 schedule and Covanta followup ?2

16:57 02-Apr-18


Integrated Device Technology has scheduled the report on its fiscal fourth quarter of 2018 to occur after market close on April 30th.  The average of analyst estimates calls for 44 cents of EPS on $222M in sales, which is exactly in line with management guidance.  Current quarter revenue is expected to increase to $225M.

IDTI has been understandably weak as of late, along with most computer technology stocks.  I'll be looking for opportunity stemming from any temporay weakness in the data center business.  IDT continues to innovate but even the most recent press release notes the expectation of new products in just a matter of months with roughly double the bandwidth.  The wireless charging segment seems more promising, as evidenced by MagnaChip's component work in that domain, amongst others.  I think that IDTI is slightly below fair value at $29 and change, but I'm in no rush to build positions in non-yielding stocks at the moment.

So, I'd like to conclude by sharing the feedback I got from Covanta today:

Currently, we send very little to no scrap aluminum to China so we wouldn’t expect to see any direct impact from those tariffs. That said, the US broadly does export scrap aluminum to China so if that market isn’t available for that product, the scrap aluminum will need to find another home. The tariffs the US is placing against prime aluminum could increase US demand for scrap but it is too early to say how it will play out so I think it is premature to make a comment on the long-term impact. To date, and this has been a very short time frame, scrap aluminum pricing has been a little better year to date.

Separately we do send some non-aluminum non-ferrous to China. This is a combination of copper, brass and other heavy materials. We are still investigating if this will be impacted or not. That said we are confident that there are other outlets for this material.

It was also confirmed that March HMS pricing has moved up a bit from the $317 level that was quoted in the last report for January and February.  That said, in a trend that seems likely to continue, non-ferrous revenue is increasing to generate just as much revenue as iron this year.  Chances are that recent developments will turn out to be a minor positive, but metals are still a small part of a business that has much larger and more sustainable drivers on the horizon.  Although the remainder of 2018 could continue to be challenging, CVA still seems like the best combination of long-term value and safety to me at current prices.  I may try to see if Seeking Alpha Editors are capable of understanding the reasons for that in the near future.