We've already written about Motley Fool Hidden Gems pick II-VI (NYSE: IIVI ) once this month, but events require that we write about it again -- quick. The laser equipment maker reports its third-quarter 2008 earnings tomorrow morning.
What analysts say:
-
Buy, sell, or waffle? One less analyst than last quarter now follows II-VI, but the vote's still unanimous: 5-0. They all vote "buy."
-
Revenues. On average, they're looking for 22% sales growth to $81.7 million.
-
Earnings. Profits are predicted to rise nearly as fast, up 21% to $0.40 per share.
What management says:
You've already seen the big news of the quarter. Recognizing that it does lasers better than most anybody, II-VI has decided to cut some fat, get lean and mean, and focus on its strengths. The company's eV Products division, which makes X-ray sensors, is on the auction block, price unknown.
With operating margins that hover in the 6.2% range, eV Products can certainly make some money for somebody. Accuray (Nasdaq: ARAY ) , Varian Medical (NYSE: VAR ) , L-3 (NYSE: LLL ) , and OSI Systems (Nasdaq: OSIS ) , for example, are all in the X-ray detection business. But II-VI's better off sticking to its flagship business, where margins are several times as large.
What management does:
And after II-VI succeeds in unloading eV Products? Well, revenues will take about a 2% hit, but on the bright side, profit margins earned at II-VI's remaining businesses should improve.
|
Margins
|
9/06
|
12/06
|
3/07
|
6/07
|
9/07
|
12/07
|
|
Gross
|
40.3%
|
41.6%
|
41.8%
|
41.7%
|
41.3%
|
40.9%
|
|
Operating
|
16.7%
|
18.1%
|
17.8%
|
18.4%
|
18.3%
|
18.3%
|
|
Net
|
4.8%
|
6.2%
|
7.1%
|
14.4%
|
14.6%
|
20.2%
|
Data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.
One Fool says:
Nor, by the way, need you worry that the loss of a couple of million in quarterly revenue will curtail II-VI's growth. Based on the guidance management included in its divestiture announcement, we're told to expect about $81 million in revenues tomorrow. Whether the analysts have figured this into their estimates, I do not know. What I do know is that it still makes for strong double-digit sales growth -- and there's more where that came from.
II-VI says that it booked $93 million in new orders during the quarter. And if the company sold $81 million worth of stuff, but received orders for $93 million more stuff, that must mean ... you guessed it -- that sales are still growing.
So to sum up, we've got growing sales and expanding profit margins on those growing sales. Looks to me like II-VI's growth speedometer goes to XI.
IV more on II-VI, read:
RSS Headlines
Fool UK