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Advanced Energy (AEIS) Q2 Earnings & Revenues Miss Estimates

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Advanced Energy Industries, Inc. (AEIS - Free Report) reported second-quarter 2018 adjusted earnings of $1.25 per share, missing the Zacks Consensus Estimate by 10 cents.

Also, revenues of $196 million missed the Zacks Consensus Estimate of $197 million but were within the company’s guided range of $193-$207 million. Revenues were up 18.2% year over year but almost flat sequentially.

During the quarter, the company registered strong growth in Industrial and Service businesses. However, near-term delays in semiconductor memory spending by a large number of manufacturers impacted its second-quarter revenues.

Advanced Energy announced that it has agreed toacquire LumaSense Technologies, a leader in photonic-based measurement technologies for power-intensive applications. The deal will expand the company’s share in both semiconductor as well as large industrial markets.

The company's shares have lost 15.4% in the past 12 months against the industry’s rally of 26.7%.

Revenues by Market

The revenue mix in terms of market is discussed below.

Semiconductor revenues decreased 6.4% sequentially but increased 8.8% year over year. The delays in memory expansion for 3D NAND and DRAM by one of the largest semiconductor manufacturers impacted the company’s semiconductor business.

Management expects semi third-quarter revenues to remain weak due to pushouts in logic and memory.

Industrial revenues increased 59.7% year over year and 19.2% sequentially. The increase was driven by improvements in the global economy and multiple design wins, including a significant win from a large solar PV manufacturer.

Management expects Industrial products to continue to grow in the double-digit range in the near term.

Services revenues increased 9.8% sequentially and 18.6% year over year in the second quarter.

Operating Results

Non-gross margin from continuing operations was 51.8%, down 10 basis points (bps) from the year-ago quarter. The decrease was due to an unfavorable mix.

Non-GAAP operating expenses of $41.9 million increased 20.5% year over year. As a percentage of sales, research and development expenses increased, while selling, general and administrative expenses decreased.

As a result, pro-forma operating margin was 30.5%, down 130 bps year over year.

Balance Sheet & Cash Flow

During the reported quarter, cash flow from operations was $53 million. The company repurchased $25.3 million of stock in the quarter and $38.1 million year-to-date.

Total cash, cash equivalents and Marketable securities were $436.1 million in the second quarter versus $417.1 million in the last reported quarter.

Third-Quarter Guidance

For the third quarter, Advanced Energy expects revenues in the range of $160-$170 million. The Zacks Consensus Estimate is pegged at $193.03 million. GAAP operating margin is expected in the range of 25.2-27.2%, while non-GAAP operating margin is anticipated in the range of 27.5-29.5%.

GAAP EPS are expected within 86 cents to $1.00 per share, while non-GAAP EPS are anticipated in the band of 93 cents to $1.07. The Zacks Consensus Estimate is pegged at $1.32.

Advanced Energy Industries, Inc. Price, Consensus and EPS Surprise


Advanced Energy Industries, Inc. Price, Consensus and EPS Surprise | Advanced Energy Industries, Inc. Quote

Zacks Rank and Stocks to Consider

Currently, Advanced Energy carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same industry include Groupon (GRPN - Free Report) , IAC/InterActiveCorp (IAC - Free Report) and Integrated Device Technology, Inc. (IDTI - Free Report) . While Groupon and IAC/InterActiveCorp sport a Zacks Rank #1 (Strong Buy), Integrated Device Technology holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth for Groupon, IAC/InterActiveCorp and Integrated Device Technology is currently projected to be 3%, 7.5% and 10.9%, respectively.

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