The industrial economy has recovered sharply in recent months, and companies in the sector have looked for ways to improve their manufacturing processes. Lasers have played an important role in helping industrial companies, and II-VI (COHR -1.56%) has taken full advantage to boost its business and reap the rewards for shareholders.
Coming into Monday's fiscal fourth-quarter report, investors wanted to see continued growth in II-VI's core laser business, and the company delivered with good performance. Moreover, II-VI's outlook was positive as well, leading investors to believe that the future could be even brighter down the road. Let's look more closely at II-VI and what its latest results say about its prospects.
Image source: II-VI.
II-VI stays hot
II-VI's fiscal fourth-quarter results were once again solid. Revenue rose 13% to $273.7 million, hitting a new record and dramatically exceeding the roughly $250 million consensus forecast among those following the stock. Net income more than doubled from year-ago levels to $32.6 million, and the resulting earnings of $0.50 per share compared quite favorably to expectations from investors for $0.35 per share on the bottom line.
Taking a closer look at II-VI's report, the company was pleased with the fact that for the first time ever, it finished with bookings for the full fiscal year above the $1 billion mark. Even though the quarter's figure of $272.8 million was actually down compared to the fiscal third quarter's strong numbers, the company still believes that it's carrying positive momentum going into fiscal 2018. It saw particular success in attracting orders for its performance products, where bookings climbed nearly 50%. The bookings and revenue figures were both records for the company.
II-VI saw solid contributions from all of its segments. Revenue for the key photonics segment was up 14% from the year-ago period, helping to push operating income upward by nearly a fifth. The laser solutions business posted about a 12% rise in operating profit on a more modest 9% sales boost, but the performance products business had the best numbers, seeing sales rise 20% and operating profit climb by almost 45%.
CEO Chuck Mattera was happy about the way that II-VI finished its fiscal year. "Our industry-leading vertical integration strategy served us very well this quarter and this year," Mattera said, and "we successfully integrated our fiscal 2016 acquisitions to serve our fast growing markets." The CEO also noted that more recent acquisitions continue the company's strategy of expanding through targeted buyouts.
What's ahead for II-VI?
In particular, II-VI believes that the acquisitions of optical isolator materials manufacturer Integrated Photonics as well as a semiconductor wafer fab facility from the U.K.'s Kaiam Laser should be able to help the laser maker keep growing more quickly. Mattera said that the moves should help bolster II-VI's leadership in optoelectronic devices and materials, and he sees the company having beneficial exposure to data centers, next-generation wireless networks, 3D sensing, and extreme ultraviolet lithography.
II-VI has been prudent in its purchases. The Integrated Photonics purchase cost the company $45 million in cash with the prospects for an additional earn-out of up to $2.5 million, and it will help enhance II-VI's vertically integrated processes in photonics production. Meanwhile, the $80 million purchase of Kaiam's 300,000 square foot facility includes a huge clean room for high-volume manufacturing of semiconductor devices, and that will help II-VI with the production of vertical-cavity surface-emitting laser devices.
II-VI's guidance for the current quarter supported the idea that the company will keep prospering. II-VI sees revenue of between $250 million and $260 million, which is well above the $245 million that investors were expecting, and earnings of $0.30 to $0.34 per share are solid given that they include charges related to the recent acquisitions.
Investors were quite pleased with II-VI's news, and the stock moved higher by 8% in the first hour of trading in the morning session following the announcement. With so many opportunities to grow its existing lines of business and expand into new potential growth areas, II-VI has been executing quite well and has the ability to keep doing so into the future.
