Overseas markets tend to provide a boost to U.S. companies, as they open up a whole new world of growth. However, those markets also open up a whole new world of problems, with foreign currency fluctuations typically among the biggest issues that companies face. FEI Company (NASDAQ:FEIC) experienced that problem first hand on full display when the company reported first-quarter results.
A look at the numbers
The impact of currencies was most noticeably felt on revenue, as FEI Company's first-quarter sales came in at $221 million. That was down 2.4% over the first quarter of 2014, and missed estimates by about $1 million.
However, revenue was in the middle of the company's guidance range of $215 million to $230 million. Further, if we exclude the impact of foreign exchange-rate changes, which amounted to about $15 million, the company's revenue would have grown 4%.
Earnings fared a bit better as FEI Company's net income was $28 million, or $0.66 per share. That was up from the $25 million, or $0.59 per share, the company earned in the first quarter of last year. Moreover, earnings beat analysts' estimates by $0.05, and came in $0.01 higher than the upper range of its own guidance.
Driving this better-than-expected number was margin improvement, as gross margin for the first quarter was 47.7%, which was up from 47% in the first quarter of last year. Meanwhile, operating margin was 16.4%, which was up nicely from the first quarter of last year when its operating margin was 13.6%. The boost in profitability came from increased customer adoption of new products.
FEI Company's backlog of orders hit $510 million in the first quarter, which is up from $495 million at the end of the first quarter of last year. However, that backlog was reduced by $21 million due to revaluation changes for foreign exchange rates. Meanwhile, bookings for the quarter were $216 million, which resulted in a book-to-bill ratio of 0.98-to-1 times, which is an indicator that growth is slowing down.
A look ahead
While bookings might suggest a slowdown, that's not what FEI Company is seeing. Instead, the company noted that improved order flow from several of its large semiconductor customers is supportive of a view that 2015 will still be a solid year despite the headwind from currencies.
This was evidenced in the company's guidance, as it reiterated its full-year forecast seeing revenue growing by 4%-7% year over year. This includes a 5% impact from currencies, with earnings in a range of $3.40 to $3.70 per share, which is almost $1.00 per share more than it earned last year. Its confidence in meeting its guidance comes from its solid first-quarter results, as well as its expectations for a solid second quarter.
Looking ahead to that quarter, the company sees revenue in a range of $216 million to $226 million, which includes a negative currency impact of about 6% compared to currencies in last year's second quarter. Meanwhile, earnings are expected to be in a range of $0.73 to $0.83 per share.
Overall, FEI Company delivered solid first-quarter results. While there was a noticeable impact from currencies, the company was able to produce better-than-expected profits. Meanwhile, the company reiterated its full-year guidance, as it still expects to deliver solid low single-digit revenue growth, and even more robust earnings growth despite the headwinds from a strong dollar.