It has been about a month since the last earnings report for Advanced Energy Industries (AEIS Quick QuoteAEIS - Free Report) . Shares have added about 1.6% 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 its most recent earnings report in order to get a better handle on the important drivers.

Advanced Energy Beats on Q4 Earnings & Revenues

Advanced Energy Industries reported fourth-quarter 2022 non-GAAP earnings of $1.70 per share, beating the Zacks Consensus Estimate by 7.6%. Further, the bottom line increased by 25% from the year-ago quarter.

Revenues of $490.74 million surpassed the Zacks Consensus Estimate of $471.5 million. The top line improved 24% year over year.

Strong momentum across the end markets drove the top line growth in the reported quarter.

End Market in Detail

Semiconductor Equipment: Revenues generated from the market grew 30% year over year to $232.46 million (47.4% of the total revenues). Strong wins in inspection and remote plasma sources and the introduction of new technology platforms were positives.

Industrial & Medical: Revenues from the market grew 21% year over year to $119.33 million (24.3% of the total revenues) in the reported quarter. Top line growth in the market was driven by growing design wins in surgical, medical, laser, diagnostic and life science equipment. Also, industrial wins in 3D printing, test and measurement and industrial laser contributed well.

Data Center Computing: Revenues from the market were $94.52 million (19.3% of the total revenues), up 18% from the year-ago quarter’s level.

Telecom & Networking: Revenues generated from the market were $44.43 million (9% of the total revenues), up 15% from the prior-year quarter’s level.

Operating Results

In the fourth quarter, GAAP gross margin was 36.2%, which expanded 100 basis points (bps) year over year. The non-GAAP gross profit margin was 36.6%, which expanded by 110 bps from the year-ago quarter’s level.

Non-GAAP operating expenses were $100.9 million, up 17.2% year over year. As a percentage of revenues, the figure contracted 110 bps year over year to 20.6% in the reported quarter.

The non-GAAP operating margin was 16%, expanding 220 bps from the prior-year quarter’s level.

Balance Sheet & Cash Flow

As of Dec 31, 2022, cash and cash equivalents were $458.82 million compared with $409.05 million as of Sep 30, 2022.

Total debt was $373.3 million at the fourth-quarter end, down from $378.1 million at the third-quarter end.

For the fourth quarter, cash flow from operations was $70.7 million, which jumped from $65.4 million in the second quarter.

Advanced Energy made dividend payments of $3.8 million and repurchased shares worth $0.7 million in the quarter.

Guidance

For first-quarter 2022, Advanced Energy expects non-GAAP earnings of $1.10 per share (+/- 25 cents).

Advanced Energy anticipates revenues of $415 million (+/- $20 million).

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

The consensus estimate has shifted -10.7% due to these changes.

VGM Scores

At this time, Advanced Energy has a strong Growth Score of A, 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 B. 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 #4 (Sell). We expect a below average return from the stock in the next few months.