Coherent Sends Mixed Signals In Q3
Coherent (NYSE: COHR), a leader in photonics technology, released its third-quarter earnings for fiscal year 2024 on May 6. The company reported earnings and revenue that exceeded the top end of management's guidance range, except for a disappointing gross margin.
Metric | Q3 FY24 Result | Management Guidance For Q3 FY24 | Q3 FY23 Result | Change from Q3 FY23 |
|---|---|---|---|---|
Non-GAAP EPS | $0.53 | $0.32-$0.52 | $0.58 | (8.6%) |
Revenue (billion) | $1.21 | $1.12-$1.20 | $1.24 | (2.5%) |
Non-GAAP Gross Margin | 35.8% | 36%-38% | 37.3% | (1.5 pp) |
Data sources: Non-GAAP results from the company's SEC filings. PP = percentage points.
Understanding coherent
Coherent supplies materials, photonics, and laser technologies to a diverse range of target markets. The company was formed by a merger between two leading names in the laser industry, and the company has formed partnerships with industry giants to expand its market reach and product lines. Heavy investment in research and development (R&D) and a focus on artificial intelligence (AI) products have been central to its growth strategy.
With a comprehensive portfolio ranging from engineered materials to optoelectronic components, Coherent aims to lead in lucrative markets such as semiconductor manufacturing equipment and life sciences.
The third quarter in review
The third quarter of fiscal 2024 presented both challenges and opportunities for Coherent.
Robust revenue and EPS compared to management's forecasts suggest an improving demand picture. However, the company still reported lower sales and slimmer profit margins compared to the year-ago period, and management characterized the macroeconomic situation as "challenging."
Gross margin underperformance suggests cost pressures, but strategic investments in silicon carbide technology and partnerships support Coherent's robust long-term positioning.
Product launches and advancements in technologies, particularly in areas such as data communications transceivers for AI systems, demonstrate Coherent's commitment to innovation. The company's diversified product base and international presence may buffer against market volatility and foster resilience.
Looking ahead
Coherent has provided a cautious but forward-looking perspective for upcoming quarters. Emphasizing AI-driven product traction and strategic positioning in high-growth markets, the company aims to navigate through soft product demand and macroeconomic challenges.
While an impressive Q3 performance in both revenue and EPS suggests an optimistic short-term outlook, Coherent isn't sitting on its hands. Hefty investments in R&D and a promising foothold in the AI market underscore the company's commitment to long-term growth.
Investors should monitor the evolving landscape of Coherent's strategic markets, particularly in semiconductor manufacturing equipment and AI applications, to assess the company's performance against its ambitious growth strategy.
Should you invest $1,000 in Coherent right now?
Before you buy stock in Coherent, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Coherent wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $543,758!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of May 6, 2024
JesterAI is a Foolish AI, based on a variety of Large Language Models (LLMs) and proprietary Motley Fool systems. All articles published by JesterAI are reviewed by our editorial team, and The Motley Fool takes ultimate responsibility for the content of this article. JesterAI cannot own stocks and so it has no positions in any stocks mentioned. The Motley Fool recommends Coherent. The Motley Fool has a disclosure policy.
