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Advanced Energy (AEIS) Q1 Earnings Beat, Revenues Down Y/Y

Zacks Equity Research

Advanced Energy Industries, Inc. AEIS 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.

Following the release of first quarter results, shares of the company have plunged 8.4%. On the basis of one year price performance, shares of Advanced Energy have lost 21.4% compared with the industry’s decline of 6.7%.

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.



Revenue Details

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.

End-Market Details

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.

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

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

Operating Results

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.

Guidance

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. The Zacks Consensus Estimate is pegged at 55 cents.

Zacks Rank and Stocks to Consider

Advanced Energy currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector are Intuit Inc. INTU, VMware, Inc. VMW and Agilent Technologies, Inc. A. All the three stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term earnings growth rate for Intuit, VMware and Agilent is pegged at 16.21%, 13.4% and 11.75%, respectively.

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