It has been about a month since the last earnings report for Advanced Energy Industries (AEIS Quick QuoteAEIS - Free Report) . Shares have added about 5.6% 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 the most recent earnings report in order to get a better handle on the important drivers.

AEIS Q3 Earnings Beat Estimates, Revenue Down Y/Y

Advanced Energy Industries  reported non-GAAP earnings of 98 cents per share in the third quarter of 2024, beating the Zacks Consensus Estimate by 6.52%. The bottom line declined 23.4% on a year-over-year basis.

Revenues of $374.22 million missed the Zacks Consensus Estimate by 0.09% and declined 8.7% year over year, primarily due to the weakness across Industrial, Medical and Telecom sectors.

However, revenue was up 3% sequentially led by strength in Semiconductor and Data Center Computing.

AEIS’ End Market in Detail

Semiconductor Equipment: Revenues (52.8% of total revenues) generated from the market rose 6.7% year over year to $198 million. The figure topped the Zacks Consensus Estimate by 2.98%.

Sequentially, revenues increased 5%. The uptick can be attributed to accelerated deliveries driven by heightened AI demand. 

AEIS reported successful design wins across its target markets. Key wins included high-density power modules for semiconductor testing and eVoS and eVerest subsystems for next-generation etch and deposition systems, which helped expand its market reach and enhanced engineering efficiency.

Industrial & Medical: Revenues (20.5% of the total revenues) from the market fell 33.3% year over year to $77 million and lagged the Zacks Consensus Estimate by 4.06%.

Soft market conditions hurt top-line growth.

Sequentially, revenues declined 3%. AEIS is experiencing strong design wins in applications, such as glass coating, test and measurement, battery production and diagnostic and therapeutic medical applications, including surgical robot systems.

Data Center Computing: Revenues (21.6% of the total revenues) from the market were $80.65 million, up 18.1% year over year. The figure missed the consensus mark by 1.37%. 
Sequentially, revenues increased 11%. The upside can be attributed to heightened demand for AI infrastructure from hyperscale customers.

Telecom & Networking: Revenues (5.1% of the total revenues) generated from the market were $19.23 million, down 53.6% year over year. The figure missed the Zacks Consensus Estimate by 17.02%. 

Sequentially, revenues declined 22%. The downside was primarily due to reduced infrastructure investments and high inventory levels.

Although industrial and medical revenues were slightly down, AEIS observed solid resale activity and declining inventory levels, which may soon lead to a demand recovery in these segments.

AEIS’ Operating Results

In the third quarter, the non-GAAP gross margin was 36.3%, up 20 basis points (bps) on a year-over-year basis.

Non-GAAP operating expenses were $96.9 million, down 0.4% year over year. As a percentage of revenues, the figure increased 220 bps year over year to 25.9% in the reported quarter.

The non-GAAP operating margin was 10.5%, contracting 200 bps on a year-over-year basis.

AEIS’ Balance Sheet & Cash Flow

As of Sept. 30, 2024, cash and cash equivalents were $6.57 billion compared with $9.86 million as of June 30, 2024.

In the third quarter of 2024, cash flow from operations was $35.4 million, down from $6.9 million in the second quarter of 2024.

Advanced Energy made dividend payments of $3.9 million in the reported quarter.

AEIS Initiates Q4 Guidance

For fourth-quarter 2024, Advanced Energy expects non-GAAP earnings of $1.08 per share (+/- 25 cents).

Advanced Energy anticipates revenues of $392 million (+/- $20 million).

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision.

VGM Scores

Currently, Advanced Energy has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, 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 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.