Machine vision leader Cognex Corporation (CGNX +0.96%) set the bar high with last quarter's financial release when the company reported record results and forecast a "monster quarter." The company delivered as promised, reporting a record-breaking quarter for the just-completed period.
There was lots to report, as the company also increased its dividend and announced the fifth stock split in its history. Let's look at the numbers and see how the quarter played out.
Machine vision is used in an increasing number of complex manufacturing tasks. Image source: Getty Images.
Like a broken record
Cognex broke numerous financial records and reported the highest revenue, operating margins, and net income in the company's history.
|
Metric |
Q3 17 |
Q3 16 |
Year-Over-Year Change |
|---|---|---|---|
|
Revenue |
$259.7 million |
$147.9 million |
76% |
|
Operating margin |
42% |
37% | - |
|
Net income from continuing operations |
$102.3 million |
$53.6 million |
91% |
|
Earnings per diluted share |
$1.14 |
$0.61 |
87% |
Data from SEC filings. Chart by author.
For the just completed quarter, Cognex produced revenue of $259.7 million, up a stunning 76% over the prior year quarter, and topping consensus estimates of $256.8 million. It also came in at the high end of Cognex's own forecast between $250 million and $260 million. The consumer electronics industry was a "substantial contributor" to its record growth, but increases were seen across all geographic regions and industries, including automotive and logistics.
3D vision grew to represent 5% of the company's total revenue and has produced year over year growth in excess of 50% for several quarters. Cognex expects that growth rate to continue for the foreseeable future.
Operating margins grew to a record 42%, growing five percentage points from the 37% margins in the prior year quarter. This led to earnings per diluted share of $1.14, up 87% year over year, and exceeding analysts' expectations of $1.05 per share.
"What a spectacular quarter!" exclaimed Dr. Robert J. Shillman, Founder and Chairman of the company. "Cognex reported record-breaking revenue, net income and earnings per share that far exceeded the prior records set just last quarter. And we were extremely profitable, with operating margin expanding to a record 42% driven by significant high-margin revenue growth. I am proud of Cognoids everywhere for delivering such impressive results."
Investing in future growth
Cognex continues to pour money into the development of new technology, as spending on research, development, and engineering (RD&E) grew to $26 million, up 40% over the prior year quarter, but down to 10% of revenue, from 13% in the prior year quarter. The company has hired additional engineering staff to keep pace with the increasing demand for its products.
Selling, general, and administrative expenses increased to $61 million, up 45% year over year, but fell to 24% of revenue from 28% in the prior year quarter. The company needed to add additional sales staff to support future growth.
Sharing the wealth
Cognex also increased its quarterly dividend to $0.09 per share, up 6% from $0.085. This is the second time Cognex has raised its dividend this year. The previous increase happened in May when the dividend jumped 13% to $0.085 from $0.075.
The company will also initiate a two-for-one stock split, payable in the form of a stock dividend. This affects shareholders of record on November 17, 2017, and will occur on December 1, 2017. The previous splits took place in 1992, 1993, 1995, and 2013.
A vision of the future
For the fourth quarter, Cognex is forecasting revenue growth between $170 million and $180 million, which will represent 35% year over year growth at the midpoint of its guidance. This exceeds the consensus estimates for the quarter, as analysts are expecting revenue of $155.1 million, as the company enters a seasonally slower quarter.
Cognex believes it has a long runway, as the automation processes and complex manufacturing tasks that could benefit from machine vision continue to grow.
