It has been about a month since the last earnings report for Advanced Energy Industries (AEIS). Shares have added about 0.8% 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 catalysts.
Advanced Energy Beats on Q1 Earnings, Misses on Revenues
Advanced Energy Industries delivered first-quarter 2019 non-GAAP earnings of 58 cents per share, beating the Zacks Consensus Estimate by 10 cents. However, the figure declined 56.7% on a year-over-year basis and 20.5% sequentially.
Revenues of $140.7 million missed the Zacks Consensus Estimate of $152 million but were within management’s guided range of $138-$148 million. The top line declined 28.1% on a year-over-year basis and 8.7% from the previous quarter.
This can be primarily attributed to sluggishness in the semiconductor market and macro-economic headwinds in China where the company witnessed lower fab utilization. Further, the company suffered from declining memory applications sales.
During the quarter, the company also faced weakness in the consumer electronic market.
Nevertheless, the company witnessed solid momentum in industrial technologies space. Further, Advanced Energy won new product designs during the first quarter and is likely to continue in the later part of 2019.
Additionally, strong initiatives toward integration of businesses remain positive. Further, continued focus toward strengthening manufacturing footprint and organization efficiency is expected to aid the company in wining shareholders’ trust in the near term.
Product revenues declined about 34.5% year over year to $112.11 million in the first quarter.
Services revenues increased 17.3% from the prior-year quarter to $28.63 million.
The revenue mix in terms of market is discussed below.
Semiconductor revenues decreased 50.4% year over year. Moreover, combined revenues of product and services in this market fell 42% from the prior-year quarter. The weak demand for equipment among the company’s largest customers remained an overhang. Changing ordering patterns by customers in the semiconductor market also affected the top line in this market.
Industrial technologies revenues increased 26.7% year over year. This was primarily driven by strengthening solar, medical and high-voltage product offerings. Further, positive contributions from LumaSense buyout drove the top-line growth within this segment.
Services revenues increased 17.3% year over year in the reported quarter.
Non-GAAP gross profit from continuing operations was 47%, down from 53.2% in the year-ago quarter.
Non-GAAP operating expenses of $45.7 million increased 10.7% year over year.
As a result, pro-forma operating margin was 18.6%, down from 32% in the prior-year quarter.
Balance Sheet & Cash Flow
As of Mar 31, 2019, cash, cash equivalents and Marketable securities were $353.7 million compared with $351.8 million Dec 31, 2018.
During the first quarter, cash flow from operations was $5.4 million compared with $32.9 million in the last reported quarter.
Capital expenditure during the reported quarter stood at $2.4 million.
For the second quarter of 2019, Advanced Energy expects revenues in the range of $130 million to $140 million.
Non-GAAP earnings is anticipated in the band of 25-40 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 -39.59% due to these changes.
At this time, Advanced Energy has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. 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.
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