Advanced Energy Industries, Inc. Soars on Q3 Earnings Beat, Poised for Higher Gains

Advanced Energy Industries Stock Up 73% in 2019

The temporary lull in corporate profits seems to be over (at least for some tech stocks). Advanced Energy Industries, Inc. (NASDAQ:AEIS) recently surprised Wall Street after it announced third-quarter earnings that trounced analyst forecasts.

The strong results and positive guidance sent AEIS stock soaring, breaking through a tested resistance level at $60.00 and hitting a new 52-week high of $72.26.

At the time of this writing, Advanced Energy Industries stock is trading up 51% year-over-year and up 73% since the start of 2019.

AEIS Stock Overview

Advanced Energy Industries designs, manufactures, and sells power conversion, measurement, and control solutions. (Source: “About Us,” Advanced Energy Industries, Inc., last accessed November 12, 2019.)

Its products include gas sensors, high- and low-voltage power supplies, plasma power generators, power controllers, and temperature measurement products.

The Fort Collins, Colorado-based company’s diverse client base operates in a wide range of industries, including aerospace, data center computing, healthcare, semiconductor equipment, and telecommunications.

(Source: “Advanced Energy Industries, Inc. (AEIS),” Yahoo! Finance, last accessed November 12, 2019.)

The performance of Advanced Energy Industries stock has been choppy to say the least. Still, AEIS shares have been trouncing the stock market.

In early September, AEIS stock got a boost after it announced the closing of its acquisition of Artesyn Embedded Power.

Shares of Advanced Energy Industries got another big jolt when the company announced a third-quarter earnings beat and solid outlook. If history is any indicator, investors can expect AEIS to give up ground to short-term profit-taking.

Chart courtesy of StockCharts.com

Acquisition of Artesyn Embedded Power

In early September, Advanced Energy Industries completed its previously announced acquisition of Artesyn Embedded Power. (Source: “Advanced Energy Completes the Acquisition of Artesyn Embedded Power,” Advanced Energy Industries, Inc., September 10, 2019.)

Artesyn Embedded Power is one of the world’s largest providers of highly engineered, application-specific power supplies, serving a number of major growth markets, including data-center, 5G, industrial, and medical technologies.

With the $400.0-million acquisition, Advanced Energy Industries creates a $1.3-billion company, triples its addressable market to $7.5 billion, targets long-term synergies of over $40.0 million, and targets long-term accretion of more than $1.50 per share on a non-generally accepted accounting principles (GAAP) basis.

Third-Quarter Earnings Beat

On November 12, Advanced Energy Industries announced that its third-quarter total revenue, for the period ended September 30, increased 1.2% year-over-year and 30% sequentially to $175.1 million. (Source: “Advanced Energy Announces Third Quarter 2019 Results,” Advanced Energy Industries, Inc., November 12, 2019.)

Third-quarter net income from continuing operations was $7.3 million ($0.19 per share), down from $23.4 million ($0.61 per share) in the second quarter of 2019 and $35.2 million ($0.90 per share) in the same period last year.

Adjusted net income was $20.9 million ($0.54 per share), up from $17.2 million ($0.45 per share) in the second quarter of 2019 but down from $41.2 million ($1.05 per share) in the third quarter of 2018. The $0.54 earnings per share beat analyst forecasts of $0.37.

Analyst Take

While Advanced Energy Industries stock has been on an upward trend in 2019, it really took off after the company announced strong third-quarter results.

After four consecutive quarters of sales declines, Advanced Energy Industries, Inc. reported strong sequential revenue growth. The company also reported better-than-expected adjusted earnings, which suggests that the cyclical downturn in the semiconductor industry is coming to an end.

Investor optimism must also be getting a boost after Advanced Energy Industries closed its acquisition of Artesyn Embedded Power ahead of schedule, adding incremental revenue and non-GAAP earnings in the third quarter.

All of this bodes well for AEIS stock in the fourth quarter and the coming years.