Please ensure Javascript is enabled for purposes of website accessibility

Impinj Crushed Wall Street's Estimates in This Earnings Report Under COVID-19

By Anders Bylund - Apr 28, 2020 at 8:13AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The maker of RFID tags and related tools didn't even do it "in spite of" the virus -- the health crisis actually gave Impinj a temporary boost.

Radio frequency identification (RFID) specialist Impinj (PI 0.65%) reported first-quarter results after the closing bell on Monday. Revenues rose 44% year over year while the bottom line swung to adjusted earnings of $0.13 per share, crushing Wall Street's estimates across the board.

Impinj's first-quarter results by the numbers

Metric

Q1 2020

Q1 2019

Change

Analyst Consensus

Revenue

$47.8 million

$33.1 million

44%

$38.4 million

GAAP net income (loss)

($4.3 million)

($7.1 million)

39%

N/A

Adjusted earnings (loss) per diluted share

$0.13

($0.11)

N/A

($0.06)

Data source: Impinj. GAAP = generally accepted accounting principles.

As a supplier of behind-the-scenes infrastructure tools for the healthcare industry, Impinj saw its revenues skyrocket in the coronavirus era. Your average analyst would have settled for a 16% year-over-year sales boost and Impinj nearly tripled that growth rate.

Several major customers across the automotive, aviation, and retail industries placed an unexpected cluster of orders for RFID endpoints near the end of March, adding $6.2 million of rush orders to Impinj's revenue line. These expedited orders may match up with lower order volumes from the same client in the next few quarters, as the customers stocked up their RFID supplies heading into a period of great uncertainty.

A hand, wearing a medical glove, holds several RFID tags.

Image source: Getty Images.

In the meantime, Impinj enjoys a solid market position as a leading supplier of inventory management and process-handling tags. This company's RFID tags are particularly useful to online retailers, which goes a long way toward explaining this quarter's strong results. That being said, Impinj counts the healthcare sector among its most important target markets, especially in times like these.

"Our team is well aware that hospitals and healthcare facilities around the world are using our products in the fight against COVID-19, to track equipment and consumables and to streamline hospital operations," said CEO Chris DiOrio on the first-quarter earnings call. "Because our end users use our products worldwide, not only in hospitals but also in other essential use cases, we understand the importance of continuing to meet our commitments, while we strive to keep our employees safe."

The healthcare sector uses RFID tags to track everything from medical inventories and equipment to scrubs, bed linens, and patient records. Automating the tracking process helps hospitals cut down wait times and get more work done in a more efficient workflow.

What's next for Impinj?

Looking ahead to the second quarter, Impinj declined to offer detailed financial guidance due to the ongoing health crisis, but management did offer some high-level comments on the state of the market.

RFID-reader system sales will fall in the second quarter, partly because of the coronavirus pandemic forcing customers to tighten their belts but also due to a large North American client moving on from system installations to full-speed RFID operations. This unnamed customer will use a lot of RFID tags going forward, but it largely has all the reader equipment it needs.

While healthcare clients and e-commerce retailers are delivering solid order flows, the situation for other core markets such as automotive sales, offline clothing retail, and airline baggage tracking is downright grim. CFO Cary Baker said that Impinj expects generally lower demand for endpoints in the second quarter as these puts and takes balance out, but the company should be able to weather this storm.

"In the longer term, we know that the COVID-19 crisis will pass," Baker said. "The disruption will clear, the economy will reopen and the demand will come back. We remain focused on emerging on the other side of COVID-19 a stronger and more competitive company."

Impinj's shares rose 7.7% in after-hours trading, boosted by the company's muscular first-quarter results. Investors haven't seen these prices since early March, but Impinj still has a long way to go before making a full recovery. The road ahead will be rocky, and the second quarter looks like a landmine.

Picking up a few shares of Impinj might make sense at this point, but I wouldn't advise you to back up the farm and bet the truck on this stock today. If Impinj strikes you as a fantastic growth stock for the long haul, you should be prepared to pounce at a lower price point as the second-quarter story plays out.

Anders Bylund has no position in any of the stocks mentioned. The Motley Fool recommends Impinj. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Impinj, Inc. Stock Quote
Impinj, Inc.
PI
$97.00 (0.65%) $0.63

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
394%
 
S&P 500 Returns
127%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/19/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.