A month has gone by since the last earnings report for Advanced Energy Industries (AEIS). Shares have added about 1.9% in that time frame, underperforming 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 drivers.
Advanced Energy Q4 Earnings Beat, Revenues Fall Y/Y
Advanced Energy Industries reported mixed fourth-quarter 2023 non-GAAP earnings of $1.24 per share, beating the Zacks Consensus Estimate by 7.83%. However, the bottom-line figure declined 27.1% on a year-over-year basis.
Revenues of $405 million lagged the Zacks Consensus Estimate by 0.59% and declined 17.4% year over year primarily due to the weakness across the Industrial & Medical and Data Center Computing end-markets.
Despite this decline, the backlog was $407 million at the end of the reported quarter.
The company’s expansion is noteworthy. In 2023, AEIS launched 20 new products across its markets.
End Market in Detail
Semiconductor Equipment: Revenues (47.2% of the total revenues) generated from the market fell 17.7% year over year to $191 million. The figure topped the Zacks Consensus Estimate by 6.52%.
Sequentially, revenues increased 3%. AEIS witnessed a strong performance in high-voltage products, highlighted by the successful launch of eVerest and eVoS for etch and deposition applications.
During the fourth quarter, the shipment of eVerest and eVoS experienced a notable surge, reaching a total of 80 units. Additionally, a more advanced and higher-flow version of the
MAXstream remote plasma source product was successfully delivered.
Industrial & Medical: Revenues (26.8% of the total revenues) from the market fell 9% year over year to $109 million and lagged the Zacks Consensus Estimate by 10.04%. Soft market conditions hurt top-line growth.
Sequentially, revenues declined 6%. Nevertheless, Advanced Energy managed to secure noteworthy design wins in the reported quarter, particularly in robotics, test and measurement, mill arrow and indoor farming applications.
AEIS also responded to the market demands by introducing the NeoPower family of configurable power supplies to address the demand for higher power in a more compact form, boasting best-in-class power density for industrial and medical customers.
Data Center Computing: Revenues (15.5% of the total revenues) from the market were $63 million, down 33.5% year over year. The figure missed the consensus mark by 14.17%.
Sequentially, revenues declined 8%. However, the softness in the enterprise market was partially offset by the increased volume of the hyperscale product.
Telecom & Networking: Revenues (10.5% of the total revenues) generated from the market were $42.44 million, down 4.5% year over year. The figure beat the Zacks Consensus Estimate by 38.98%.
In the fourth quarter, the non-GAAP gross margin was 35.7%, down 90 basis points (bps) on a year-over-year basis.
Sequentially, the gross margin contracted by 40 bps primarily due to a less favorable revenue mix.
Non-GAAP operating expenses were $95 million, down 6% year over year. As a percentage of revenues, the figure increased 280 bps year over year to 23.4% in the reported quarter.
The non-GAAP operating margin was 12.3%, contracting 370 bps on a year-over-year basis.
Balance Sheet & Cash Flow
As of Dec 31, 2023, cash and cash equivalents were $1.05 billion compared with $985.9 million as of Sep 30, 2023.
Debt principal payments of $5 million were made in the reported quarter.
In 2023, Advanced Energy completed a private offering of $575 million aggregate principal amount of 2.50% Convertible Senior Notes due 2028.
In the fourth quarter of 2023, cash flow from operations was $85 million, higher than $72.7 million in the third quarter of 2023.
Advanced Energy made dividend payments of $3.8 million in the reported quarter.
In 2023, AEIS spent $40 million of common stock and made a dividend payment of $15.2 million.
Guidance
For first-quarter 2024, Advanced Energy expects non-GAAP earnings of 70 cents per share (+/- 20 cents).
Advanced Energy anticipates revenues of $350 million (+/- $15 million).
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 -47.22% due to these changes.
VGM Scores
At this time, Advanced Energy has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. However, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
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.
Performance of an Industry Player
Advanced Energy belongs to the Zacks Semiconductor Equipment - Wafer Fabrication industry. Another stock from the same industry, Lam Research (LRCX), has gained 15.7% over the past month. More than a month has passed since the company reported results for the quarter ended December 2023.
Lam Research reported revenues of $3.76 billion in the last reported quarter, representing a year-over-year change of -28.8%. EPS of $7.52 for the same period compares with $10.71 a year ago.
Lam Research is expected to post earnings of $7.23 per share for the current quarter, representing a year-over-year change of +3.4%. Over the last 30 days, the Zacks Consensus Estimate has changed -0.5%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #2 (Buy) for Lam Research. Also, the stock has a VGM Score of D.
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