Shares of electronic power components-maker Vicor (VICR 15.07%) plunged 19.2% through 11:30 a.m. ET Friday after the company reported a big earnings miss last night.
Analysts had forecast Vicor would earn $0.33 per share in its fourth and final quarter of 2023, nearly doubling last year's $0.18 Q4 2022 profit. Now, the good news is that profits did increase for the quarter. But when the final numbers came out last night, it turned out Vicor grew its earnings by only one single penny, to $0.19 per share -- much less than the growth expected.
NASDAQ: VICR
Key Data Points
Vicor's earnings report
Again, the news could have been worse. Vicor's Q4 sales declined more than 12% year over year, so the company logically should have suffered a profits decline rather than an increase -- even of just $0.01 per share. Vicor, however, was able to expand its profit margin on the revenue that it did collect, with gross margins rising 450 basis points to 51.1%. The company also cut its selling, general, and administrative expenses in the quarter, even as it increased spending on research and development slightly, helping to further boost profitability on the bottom line.
When all was said and done, it added up to a 5.5% increase in bottom-line profits -- not as good as expected, but certainly better than might have happened.
For the full year, Vicor ended up with 1.5% sales growth (to $405 million), and more than doubled its profits to $1.19 per share.
Worrisome guidance
Thus, Q4 was a disappointment, but 2023 as a whole was still pretty successful for Vicor. So why are investors selling off the stock today? My hunch is that guidance is the answer. Vicor didn't give any detailed forecast for future sales or earnings. What management did say, however, was worrisome.
Backlog of future work to be done -- which foreshadows future sales growth -- looks exceedingly weak, falling 47% from Q4 2022 to just $160.8 million. To an extent, this appears to be intentional, as CEO Patrizio Vinciarelli confided Vicor has "turned down deals that would have been inconsistent with our long term strategy," sacrificing sales in a search for stronger margins. Even so, this implies weak or even negative sales growth going forward.
That's probably not what growth investors were hoping to hear from Vicor -- stronger margins at the expense of weaker sales. It's probably the primary reason this stock is selling off today. Well, that and the earnings miss!
