Cognex beat the Street – but weak guidance spooks investors
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Cognex beat the Street – but weak guidance spooks investors

Machine vision systems, sensors, and software maker Cognex reported earnings at the beginning of this week that beat Wall Street’s expectations – but declined from the previous year. This decline is not unexpected – it is common knowledge that the company’s two big cash cows (automotive capital and smartphone production) have been muted throughout the year, and Cognex has spoken on previous earnings calls about a slowdown in China. Despite showing year-on-year decline, Cognex has done better than predicted. But investors weren’t happy about guidance that suggests there are more declines coming.

Cognex’s share price was up 3% over the week leading to earnings

Cognex July 30

Source: Yahoo Finance

Here are the figures: in its second quarter, Cognex logged a year-on-year decrease in revenue of 6%. Despite that decline, Cognex’s $199 million top-line was 15% better off than it managed in the first quarter. When it comes to the bottom line, Cognex reported earnings of 27c per share. That beat analysts’ expectations, but didn’t match up to the year-ago figure of 31c.

Speaking to these results, the company’s founder and chairman, Dr. Robert J. Shillman, said: “Our Q2 results were in line with our guidance and we were highly profitable, reporting an operating margin of 26%. But, as expected, revenue declined year over year due to persistent softness in our two largest markets, consumer electronics and automotive.”

Cognex’s CEO, Robert J. Willett, added: “Despite continued strong growth in logistics, the slowdown in spending by customers in our two largest markets resulted in lower overall revenue for Cognex. Because of that slowdown we have reallocated resources to faster-growing areas. Our long-term positive view notwithstanding, our outlook for the near term has worsened due to a further deterioration in business conditions we are seeing in Europe and Asia.”

Disclosure

Dominion holds Cognex in its Global Trends Managed Fund.


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