A month has gone by since the last earnings report for Advanced Energy Industries (AEIS - Free Report) . Shares have added about 8.6% 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 catalysts.
Advanced Energy Beats on Q3 Earnings & Revenues Estimates
Advanced Energy Industries reported third-quarter 2018 adjusted earnings of $1.05 per share, outpacing the Zacks Consensus Estimate by 5 cents. However, the figure declined 12% on a year-over-year basis and 16% sequentially.
Also, revenues of $173.1 million beat the Zacks Consensus Estimate of $166 million and surpassed the company’s guided range of $160-$170 million. However, the top line declined 2% year over year.
During the quarter, the company registered strong growth in Industrial and Service businesses, which included the benefits realized from the acquisition of LumaSense Technologies. The buyout contributed $5.6 million in revenues in the reported quarter. However, near-term delays in semiconductor memory spending by a large number of manufacturers negatively impacted revenues.
Product revenues declined about 5% year over year to $144.8 million in the third quarter.
Services revenues increased 16.5% to $28.2 million from the prior-year quarter.
Non-GAAP gross profit from continuing operations was 50%, down 240 basis points (bps) from the year-ago quarter. This decline was primarily due to high facility transition and relocation costs.
Non-GAAP operating expenses of $42.2 million increased 16.6% year over year. As a percentage of sales, R&D expenses as well as selling, general and administrative expenses increased.
As a result, pro-forma operating margin was 25.6%, down 630 bps year over year.
Balance Sheet & Cash Flow
During the reported quarter, cash flow from operations was $30.6 million compared with $53 million in the previous quarter. The company repurchased $31 million of shares in the quarter.
Total cash, cash equivalents and Marketable securities were $341.8 million in the third quarter compared with $436.1 million last quarter.
Management expects the fourth quarter to be impacted by the continued slowdown in semiconductor capital spending. The industrial market is also expected to witness lower activity due to seasonality.
For the fourth quarter, Advanced Energy expects revenues in the range of $150-$160 million. GAAP operating margin is expected in the range of 12.8-17.5% while non-GAAP operating margin is anticipated to be 20-22%.
GAAP EPS is expected within 48 cents to 66 cents per share while non-GAAP EPS is anticipated in the band of 70 cents to 80 cents.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -33.02% due to these changes.
Currently, Advanced Energy has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.
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.