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Why Is Advanced Energy (AEIS) Up 5.1% Since Last Earnings Report?
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It has been about a month since the last earnings report for Advanced Energy Industries (AEIS - Free Report) . Shares have added about 5.1% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Advanced Energy due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Advanced Energy Beats on Q3 Earnings & Revenues
Advanced Energy Industries reported third-quarter 2019 non-GAAP earnings of 54 cents per share, beating the Zacks Consensus Estimate by 45.9%. Further, the figure was higher than management’s guided range of 28-38 cents.
Notably, Artesyn Embedded Power buyout contributed 7 cents per share to the bottom line. Excluding the acquisition, EPS would have been 47 cents.
However, the reported figure declined 48.6% on a year-over-year basis but surged 20% sequentially.
Revenues of $175.1 million surpassed the Zacks Consensus Estimate of $154.7 million and management’s guided range of $123-$133 million. Further, the figure improved 1.2% from the year-ago quarter and 30% from the prior quarter.
The top line was driven by solid momentum across Asia during the reported quarter. Further, improving demand in semiconductor equipment market remained positive.
Additionally, positive acquisition contributions remained a major positive. Artesyn Embedded Power buyout accounted for $41 million of revenues in the reported quarter.
Further, Advanced Energy made foray into two new growth markets – data center computing, and telecom and networking on the back of Artesyn Embedded Power acquisition.
However, the company bore the impact of macro-economic headwinds throughout the third quarter. Further, sluggishness in the semiconductor market persisted as a headwind.
Nevertheless, strong cost optimization strategy, new product design wins and strong product pipelines are likely to help the stock recover in the near term.
Top-Line in Detail
Product revenues improved 2.3% year over year to $148.1 million (84.6% of total revenues) in the third quarter. This can primarily be attributed to growing semiconductor revenues due to strengthening momentum in semiconductor equipment space and contributions from design wins.
Services revenues decreased 4.4% from the prior-year quarter to $26.9 million (15.4% of revenues). This can primarily attributed to sluggish semiconductor service revenues. Further, divestiture of U.S. central inverter business impacted the results negatively, without which revenues would have remained flat year over year.
Product Line in Detail
Semiconductor Equipment revenues decreased 19.6% year over year to $96.4 million (55.1% of the total revenues). This was owing to low fab utilization, which hurt the demand for used equipment and retrofits. However, the company witnessed growing investments in foundry/logic that boosted demand for the company’s semiconductor products during the reported quarter.
Industrial & Medical revenues improved 3.9% year over year to $55.2 million (31.5% of revenues). Contributions from Artesyn Embedded Power acquisition remained positive. Further, motor drive design win drove the revenues further. Additionally, solid performance of the company’s portfolio of high and low voltage power supplies in the medical imaging and diagnostic market contributed to revenues. However, weak demand for automotive and industrial applications, manufacturing contraction in Europe, and increased pricing pressure in the solar market is likely to continue weighing on margins.
Telecom & Networking revenues were $10.02 million (5.7% of revenues). The company benefited from 5G platforms at infrastructure equipment suppliers.
Data Center Computing revenues were $13.5 million (7.7% of revenues). New design wins across hyperscale and enterprise customers remained a positive.
Operating Results
In third quarter, non-GAAP gross profit was 43.6%, which contracted 640 bps in the year-ago quarter.
Non-GAAP operating expenses as a percentage of total revenues came in 30.5%, which expanded 610 bps year over year.
Further, non-GAAP operating margin was 13.1%, contracting from 25.6% in the prior-year quarter.
Balance Sheet & Cash Flow
As of Sep 30, 2019, cash, cash equivalents and Marketable securities were $341.1 million compared with $359.8 million Jun 30, 2019.
During the third quarter, cash flow from operations was $10.5 million compared with $11.5 million in the second quarter.
Capital expenditure during the reported quarter stood at $8.9 million.
Guidance
For fourth-quarter 2019, Advanced Energy expects revenues in the range of $295-$325 million.
Non-GAAP earnings is anticipated in the band of 56-80 cents.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 48.18% due to these changes.
VGM Scores
At this time, Advanced Energy has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. It comes with little surprise Advanced Energy has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
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Why Is Advanced Energy (AEIS) Up 5.1% Since Last Earnings Report?
It has been about a month since the last earnings report for Advanced Energy Industries (AEIS - Free Report) . Shares have added about 5.1% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Advanced Energy due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Advanced Energy Beats on Q3 Earnings & Revenues
Advanced Energy Industries reported third-quarter 2019 non-GAAP earnings of 54 cents per share, beating the Zacks Consensus Estimate by 45.9%. Further, the figure was higher than management’s guided range of 28-38 cents.
Notably, Artesyn Embedded Power buyout contributed 7 cents per share to the bottom line. Excluding the acquisition, EPS would have been 47 cents.
However, the reported figure declined 48.6% on a year-over-year basis but surged 20% sequentially.
Revenues of $175.1 million surpassed the Zacks Consensus Estimate of $154.7 million and management’s guided range of $123-$133 million. Further, the figure improved 1.2% from the year-ago quarter and 30% from the prior quarter.
The top line was driven by solid momentum across Asia during the reported quarter. Further, improving demand in semiconductor equipment market remained positive.
Additionally, positive acquisition contributions remained a major positive. Artesyn Embedded Power buyout accounted for $41 million of revenues in the reported quarter.
Further, Advanced Energy made foray into two new growth markets – data center computing, and telecom and networking on the back of Artesyn Embedded Power acquisition.
However, the company bore the impact of macro-economic headwinds throughout the third quarter. Further, sluggishness in the semiconductor market persisted as a headwind.
Nevertheless, strong cost optimization strategy, new product design wins and strong product pipelines are likely to help the stock recover in the near term.
Top-Line in Detail
Product revenues improved 2.3% year over year to $148.1 million (84.6% of total revenues) in the third quarter. This can primarily be attributed to growing semiconductor revenues due to strengthening momentum in semiconductor equipment space and contributions from design wins.
Services revenues decreased 4.4% from the prior-year quarter to $26.9 million (15.4% of revenues). This can primarily attributed to sluggish semiconductor service revenues. Further, divestiture of U.S. central inverter business impacted the results negatively, without which revenues would have remained flat year over year.
Product Line in Detail
Semiconductor Equipment revenues decreased 19.6% year over year to $96.4 million (55.1% of the total revenues). This was owing to low fab utilization, which hurt the demand for used equipment and retrofits. However, the company witnessed growing investments in foundry/logic that boosted demand for the company’s semiconductor products during the reported quarter.
Industrial & Medical revenues improved 3.9% year over year to $55.2 million (31.5% of revenues). Contributions from Artesyn Embedded Power acquisition remained positive. Further, motor drive design win drove the revenues further. Additionally, solid performance of the company’s portfolio of high and low voltage power supplies in the medical imaging and diagnostic market contributed to revenues. However, weak demand for automotive and industrial applications, manufacturing contraction in Europe, and increased pricing pressure in the solar market is likely to continue weighing on margins.
Telecom & Networking revenues were $10.02 million (5.7% of revenues). The company benefited from 5G platforms at infrastructure equipment suppliers.
Data Center Computing revenues were $13.5 million (7.7% of revenues). New design wins across hyperscale and enterprise customers remained a positive.
Operating Results
In third quarter, non-GAAP gross profit was 43.6%, which contracted 640 bps in the year-ago quarter.
Non-GAAP operating expenses as a percentage of total revenues came in 30.5%, which expanded 610 bps year over year.
Further, non-GAAP operating margin was 13.1%, contracting from 25.6% in the prior-year quarter.
Balance Sheet & Cash Flow
As of Sep 30, 2019, cash, cash equivalents and Marketable securities were $341.1 million compared with $359.8 million Jun 30, 2019.
During the third quarter, cash flow from operations was $10.5 million compared with $11.5 million in the second quarter.
Capital expenditure during the reported quarter stood at $8.9 million.
Guidance
For fourth-quarter 2019, Advanced Energy expects revenues in the range of $295-$325 million.
Non-GAAP earnings is anticipated in the band of 56-80 cents.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 48.18% due to these changes.
VGM Scores
At this time, Advanced Energy has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. It comes with little surprise Advanced Energy has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.