Advanced Energy Industries Q3 Earnings: Is NasdaqGS:AEIS Manipulating Earnings?

in EARNINGS/INVESTING IDEAS by

Advanced Energy Industries, Inc. (NasdaqGS:AEIS) is scheduled to report Q3 earnings results before markets open for trading on November 5, 2020.

The company is expected to report earnings of $1.16/share on revenue of $350.9 million. The consensus earnings per share (EPS) of $1.16/share is based on a poll of 9 analysts and represents a growth in eps of 114.4% over the same quarter last year, when the company reported earnings of $0.54/share.

The revenue forecast of $350.9 million based on a poll of 7 analysts implies a year-over-year (YoY) growth in revenue of 100.4%. Last year the company reported $175.1 million in revenue for the quarter.

Expected to report EPS growth of 114.4% for Q3, 2020
Metric Expected Prior Year YoY Change
Revenue $350.91 $175.13 100.4%
EPS $1.16 $0.54 114.4%

Earnings Call Trends

Historically, management has exceeded analyst expectations 7 out of the last 8 tracked quarters, and missed expectations 1 quarters.

What are your expectations from Advanced Energy Industries, Inc. for earnings this quarter? Let us know in the comments!

Analyst Expected vs. Reported EPS
Quarter Expected Reported Surprise Result
Q2, 2020 $0.82 $1.18 44.8% Beat
Q1, 2020 $0.64 $0.91 41.4% Beat
Q4, 2019 $0.70 $0.87 25.2% Beat
Q3, 2019 $0.38 $0.54 40.4% Beat
Q2, 2019 $0.35 $0.45 30.0% Beat
Q1, 2019 $0.49 $0.58 19.3% Beat
Q4, 2018 $0.76 $0.73 −3.8% Missed
Q3, 2018 $1 $1.05 4.7% Beat

In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report. After the last earnings report for the period ending June 30, 2020, the stock price reacted by increasing 2.5%.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
August 5, 2020 $74.92 $76.78 2.5% Increase
May 6, 2020 $54.82 $60 9.4% Increase
February 18, 2020 $76.86 $71.09 −7.5% Decline
November 12, 2019 $63.23 $64.07 1.3% Increase

The other question to consider is one of earnings manipulation. There is a lot of pressure on management each quarter to deliver on earnings expectations. The Beneish M-Score is a statistical model that provides some insight into whether the company might be manipulating earnings. With a Beneish M-Score of −1.84, the model suggests that the company is a possible earnings manipulator. A value of −1.84 implies a 3.3% chance of earnings manipulation.

Fundamentals And Technical Analysis

Advanced Energy Industries, Inc. is currently trading at $67.26/share, down −3.2% for the day. The company is trading at approximately 82.5% of its 52-week high of $82.26/share. The company’s stock price is down −12.4% since the last earnings report and down −7.6% over the previous week. The company’s 14 Day Relative Price Index (RSI) of 54.63 suggests the company is trading in technically neutral territory. The RSI is considered overbought when above 70 and oversold when below 30.


NasdaqGS:AEIS Stock Price Chart
Source: Finbox

The current share price implies a price-to-earnings (P/E) multiple of 39.42 and a forward P/E multiple of 16.00.

Advanced Energy Industries, Inc.’s current share price also implies a price-to-book (P/B) multiple of 3.59. The following table summarizes some other key fundamental ratios:

Data as of October 28, 2020
Metric Value
Last Reported Fiscal Period Key FY2020.Q2
Period End Date June 30, 2020
Stock Price (Current) $67.26
P/E Ratio 39.4x
P/E Ratio (Fwd) 16.0x
PEG Ratio −1.1
Total Debt / Total Capital 14.3%
Levered Free Cash Flow $69.237 million
EV / EBITDA 16.3x

Finbox

Advanced Energy Industries, Inc. is a mid-cap stock with a market capitalization of $2.664 billion and a total enterprise value of $2.727 billion. The company operates in the Information Technology sector and the Semiconductors & Semiconductor Equipment industry.

Advanced Energy Industries, Inc. designs, manufactures, sells, and supports precision power conversion, measurement, and control solutions worldwide. It offers process power solutions, including direct current (DC), pulsed DC, low frequency alternating current, high voltage, and radio frequency (RF) power supplies, as well as RF matching networks and remote plasma sources for reactive gas applications and RF instrumentation. The company also provides power control modules and thermal instrumentation products for rapid thermal processing, chemical vapor deposition, crystal growing, and other semiconductor and adjacent thin film applications, as well as in chemical processing, metal and glass manufacturing, and other general industrial power applications; and high voltage products for semiconductor wafer processing and metrology, electrostatic clamping of substrates, scientific instrumentation, mass spectrometry, and analytical X-ray systems for industrial and analytical applications. In addition, it offers gas detection and monitoring products for the automotive, energy, environmental control, aerospace, medical, and research industries; and embedded IEC 60601-1 for medical equipment or IEC 60950-1 for information technology equipment. Further, the company provides amplifiers, power supplies and generators, and electrostatic discharge sensors and monitors; electrostatic detection and measurement instrumentation products; and photonic-based measurement and monitoring solutions. In addition, it offers repair services, conversions, upgrades, and refurbishments and used equipment to companies. The company provides its products through direct sales force, independent sales representatives, channel partners, and distributors. Advanced Energy Industries, Inc. was founded in 1981 and is headquartered in Denver, Colorado.

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