Why Tower Semiconductor Ltd. Stock Rocketed Higher Today

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of specialty foundry Tower Semiconductor , which operates under the brand name TowerJazz, jumped more than 20% on Monday morning after the company reported its fourth-quarter earnings, beating analyst estimates.

So what: Tower reported revenue of $235 million for the fourth quarter, up 75% year-over-year and just ahead of analyst estimates. Non-GAAP EPS of $0.83 easily beat analyst estimates of $0.58, and GAAP EPS swung from a loss of $0.62 during the fourth quarter of 2013 to a gain of $0.01.

On a GAAP basis, gross margin rose to 16.2% during the quarter, up from just 6.6% during the fourth quarter of 2013. For the full year, Tower grew revenue by 64%, posting a GAAP operating loss of $103 million, nearly doubling year-over-year. GAAP EPS was positive only due to a $166 million gain from an acquisition.

Tower guided for $225 million in revenue for the first quarter of 2015, representing about 70% year-over-year growth. The company provided no guidance for earnings in its press release.

Now what: From 2004 through 2013, Tower Semiconductor posted a GAAP net loss during every single year. While 2014 seems to reverse this trend, a combination of booking a gain from an acquisition and a large tax benefit greatly skew the results. Backing out these items, as well as a $55 million restructuring charge, leads to a larger net loss in 2014 compared to 2013.

There doesn't appear to be any evidence that Tower Semiconductor is capable of producing a real profit. While Tower did better during the fourth quarter than analysts were expecting, it's still a money-losing company in a capital-intensive business. Investors considering buying shares of the company should first take a very deep look at its financials.

The article Why Tower Semiconductor Ltd. Stock Rocketed Higher Today originally appeared on Fool.com.

Timothy Green has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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