Coherent (COHR Quick QuoteCOHR - Free Report) is $3 billion designer of laser systems and components, laser measurement and control products, optics, and laser accessories, which are used both in industry and scientific research.

 

Their markets are the microelectronics industry -- such as flat panel display manufacturing, integrated circuit packaging, and integrated circuit inspection -- scientific research, OEM components, and materials processing that uses CO2 lasers for cutting metals.

 

COHR became a Zacks #5 Rank (Strong Sell) in early June when it was still trading above $150. This followed the company's late May report for their FY20 Q2 (ended March) where they lowered guidance on weakness in certain segments like smartphones and automotive.

 

Specifically, management forecasted their Q3 revenue in the range of $265 to $305 million vs. consensus at the time of $331M. Analysts subsequently took down their EPS estimates, causing the Zacks consensus to drop from $4.35 to $2.52.

 

In early August, Coherent delivered that Q3 report with revenue of $298.3 million vs the new consensus $288M. The company was also able to beat a lowered bar on EPS, but the guidance was once again underwhelming with management seeing Q4 revenue of $290M-$320M vs the consensus $325.5M. 

 

This outlook actually caused EPS estimates from 2 analysts to stabilize with consensus rising from $2.52 to $2.68 (largely given the Q3 positive surprise). And FY21 EPS estimates (begins October) moved up slightly from $5.95 to $6.04.

 

As it stands today, sales are expected to decline about 15% this fiscal year (ends Sep) while profits will be down as much as 55%.

 

Telecom and OLED remain brighter spots for the company but until analyst estimates start going back up, visibility obviously isn't clear enough to recommend further investment in COHR shares at this time. The Zacks Rank will let you know.

 

 

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