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Advanced Energy (AEIS) Down 2.3% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Advanced Energy Industries (AEIS - Free Report) . Shares have lost about 2.3% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Advanced Energy due for a breakout? 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 Misses on Q2 Earnings & Revenues

Advanced Energy Industries reported second-quarter 2021 non-GAAP earnings of $1.25 per share, missing the Zacks Consensus Estimate by 3.1%. Further, the bottom line improved 5.9% from the year-ago quarter but decreased 3.1% from the prior quarter.

Revenues of $361.3 million lagged the Zacks Consensus Estimate of $367 million. Notably, the top line improved 6.3% from the year-ago quarter and 2.8% from the previous quarter.

Top-line growth was driven by strong momentum across semiconductor equipment, and industrial and medical end markets.

However, the coronavirus-induced supply-chain constraints acted as headwinds in the quarter. Softness in the data center, telecom and networking markets were other concerns.

Nevertheless, the company is optimistic about its strengthening order traction across hyperscale customers. Further, prospects related to 5G remain key levers.

End Market in Detail

Semiconductor Equipment: Revenues generated from this market grew 21.5% year over year to $176.7 million (48.9% of total revenues), driven by a robust demand environment and solid momentum across Plasma Power products. The growing clout of MAXstream and eVoS contributed well.

Industrial & Medical: Revenues from this market grew 17.4% year over year to $70.9 million (23% of revenues) in the reported quarter. In the medical vertical, strong demand for elective care procedures aided top-line growth in this market. Further, strong design wins were positives.

Data Center Computing: Revenues from the market were $69.5 million (19.2% of revenues), down 16.6% from the year-ago quarter.

Nevertheless, the company witnessed growth in hyperscale and enterprise revenues on a sequential basis. Further, rising multiple high-end design wins for HPC and AI applications were positives.

Telecom & Networking: Revenues generated from this market were $31.9 million (8.9% of revenues), down 20.5% from the prior-year quarter. Supply-chain disruptions were negatives.

Nevertheless, strong investments in 5G infrastructure hold promise. In the reported quarter, the company secured a 5G base station design win.

Operating Results

In the second quarter, non-GAAP gross profit margin was 38%, which contracted 70 basis points (bps) from the year-ago quarter.

Non-GAAP operating expenses were $82.6 million, up 6.1% year over year. As a percentage of revenues, the figure remained flatyear over year at 22.9% in the reported quarter.

Non-GAAP operating margin was 15.1%, contracting 70 bps from the prior-year quarter.

Balance Sheet & Cash Flow

As of Jun 30, 2021, cash, cash equivalents and marketable securities were $510 million compared with $512.8 million as of Mar 31, 2021.

Total debt stood at $313.5 million at the end of the second quarter, down from $317.8 million at the end of the first quarter.

Inthe second quarter, cash flow from operations was $33.8 million compared with $54.3 million in the first quarter.

The company made dividend payments of $3.9 million and repurchased shares worth $6.5 million.

Guidance

For third-quarter 2021, Advanced Energy expects non-GAAP earnings of 80 cents per share (+/- 20 cents).

Further, the company anticipates revenues of $340 million (+/- $15 million).

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -41.89% due to these changes.

VGM Scores

Currently, Advanced Energy has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Advanced Energy has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.


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