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Advanced Energy (AEIS) Up 3.4% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Advanced Energy Industries (AEIS - Free Report) . Shares have added about 3.4% 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 Q1 Earnings & Revenues

Advanced Energy Industries reported first-quarter 2022 non-GAAP earnings of $1.24 per share, beating the Zacks Consensus Estimate by 31.9%. However, the bottom line declined 8.8% sequentially and 3.9% from the year-ago quarter.

Revenues of $397.5 million surpassed the Zacks Consensus Estimate of $360 million. The top line improved 13% from the year-ago quarter and 0.1% from the previous quarter.

Top-line growth was driven by strong momentum across all end markets.

A solid demand environment across all end markets remains a major positive for the company. Further, the latest acquisition of SL Power Electronics is expected to contribute well to the company’s performance in the industrial and medical market in the days ahead.

End Market in Detail

Semiconductor Equipment: Revenues generated from this market grew 12.3% year over year to $203 million (51% of total revenues), driven by the growing momentum across dielectric etch, RPS and panel-level packaging.

Industrial & Medical: Revenues from this market grew 5.7% year over year to $82.9 million (21% of revenues) in the reported quarter. Top-line growth in this market was driven by growing customer demand and a strong backlog.

Data Center Computing: Revenues from the market were $76.2 million (19% of revenues), up 28.9% from the year-ago quarter. This was attributed to improved scarce parts availability.

Telecom & Networking: Revenues generated from this market were $35.4 million (9% of the total revenues), up 6.1% from the prior-year quarter, owing to strong investments in 5G infrastructure, which bolstered the demand.

Operating Results

In the first quarter, the non-GAAP gross profit margin was 36.6%, which contracted 310 basis points (bps) from the year-ago quarter.

Non-GAAP operating expenses were $87.6 million, up 10.2% year over year. As a percentage of revenues, the figure expanded 60 bps year over year to 22% in the reported quarter.

The non-GAAP operating margin was 14.5%, contracting 260 bps from the prior-year quarter.

Balance Sheet & Cash Flow

As of Mar 31, 2022, cash, cash equivalents, and marketable securities were $523.5 million compared with $546.7 million as of Dec 31, 2021.

Total debt was $387.9 million at the first-quarter end, down from $392.7 million at the fourth-quarter end.

For the first quarter, cash flow from operations was $9.9 million compared with $34.5 million in the fourth quarter.

The company made dividend payments of $3.8 million and repurchased shares worth $6.6 million in the quarter.

Guidance

For second-quarter 2022, Advanced Energy expects non-GAAP earnings of $1.05 per share (+/- 30 cents).

Further, the company anticipates revenues of $395 million (+/- $25 million).

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month.

VGM Scores

At this time, Advanced Energy has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile 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 upward for the stock, and the magnitude of these revisions looks promising. Notably, Advanced Energy has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Advanced Energy belongs to the Zacks Semiconductor Equipment - Wafer Fabrication industry. Another stock from the same industry, Lam Research (LRCX - Free Report) , has gained 8.7% over the past month. More than a month has passed since the company reported results for the quarter ended March 2022.

Lam Research reported revenues of $4.06 billion in the last reported quarter, representing a year-over-year change of +5.5%. EPS of $7.40 for the same period compares with $7.49 a year ago.

Lam Research is expected to post earnings of $7.30 per share for the current quarter, representing a year-over-year change of -9.8%. Over the last 30 days, the Zacks Consensus Estimate has changed -0.1%.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Lam Research. Also, the stock has a VGM Score of C.


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