What happened
Shares of Coherent (COHR) fell 25.2% in May, according to data from S&P Global Market Intelligence . The industrial laser and equipment company's stock started the month off with sell-offs on the heels of its second-quarter report on April 30, and indications that the U.S. and China were getting farther away from a potential trade deal sent a fresh wave of volatility through the broader market and triggered additional negative momentum for Coherent.
Because its lasers are used in industrial processes for manufacturing things like organic light-emitting diodes, Coherent stock has traded closely in relation with the outlook for a trade deal with China. Highlighting the uncertainty the trade situation has created, Coherent has opted not to give full-year or longer term guidance. It's also possible that news published on May 8, stating that the company would make changes to its board of directors, had a negative impact on the stock, although there isn't necessarily a clear relationship between the two occurrences.
Image source: Coherent.
So what
Revenue for the company's second quarter came in at $372.9 million, down 22.5% year over year but still ahead of the average analyst estimate's call for sales of roughly $369 million. Adjusted earnings per share for the period were $1.61 -- down from $3.37 in Q2 2018, but still significantly ahead of the average analyst estimate's target for per-share earnings of $1.47.
The Asian market accounted for roughly 51% of the company's total second-quarter sales. Japan and South Korea each contribute a substantial portion of the segment's geographic sales, but China remains the biggest contributor. Accordingly, it's not surprising the stock lost ground as trade disputes took a turn for the worse last month.
Now what
Coherent stock has benefited from a market rebound in June, and its shares trade up roughly 11% in the month so far.
Management expects revenue for the third quarter to be between $335 million and $355 million and is guiding for a non-GAAP gross margin between 37% and 40%. Those figures compare with $482.3 million in revenue and a non-GAAP gross margin of 46.4% that the company posted in the third quarter of 2018. While the company's OLED business is expected to decline substantially this year, Coherent expects to post a record year for its original equipment manufacturer components business.
Shares trade at roughly 18 times this year's expected earnings.
