In the early morning hours on Tuesday, II-VI (NASDAQ: IIVI) reported results for the fourth quarter and full fiscal year of 2015. The maker of opto-electronic components such as lasers and advanced optics smashed fourth-quarter expectations. However, II-VI followed up with disappointing guidance for the next quarter.
For the fourth quarter, analysts expected earnings of $0.23 per share on revenues of roughly $190 million. II-VI grew sales 4.6% year over year to land at $197 million. Adjusted earnings jumped to $0.27 per diluted share, a 35% boost over the year-ago period.
On the downside, order bookings grew far slower than recorded revenues, and also below the pace seen in recent quarters. This metric increased by 2.2% year over year in the fourth quarter, far below the 10.2% growth rate see for 2015 as a whole.
As the mild order growth might suggest, II-VI set a low bar for first-quarter sales and earnings. At the midpoints of official guidance ranges, the company expects earnings of approximately $0.23 per share on $185 million in total sales. Here, analysts currently expect earnings near $0.26 per share and sales in the $193 million range.
Management didn't offer much color behind the soft first-quarter outlook, other than a nod to seasonality. The first quarter tends to be II-VI's slowest period of each year. The second half of 2016 is expected to show stronger results than the first half, continuing the discussion of seasonal patterns. For the record, the first quarter of 2015 had adjusted earnings of $0.20 per share on sales of $185.8 million. If the forward guidance turns out to be on the money, II-VI will see rising earnings and margins but stagnant sales in the first quarter.
The company also announced an internal reorganization, reducing the number of reportable segments from five to three.
The former advanced products and military and materials divisions have been combined into a new group known as performance products. Laser solutions combines portions of the old infrared optics, near-infrared optics, and active optical products segments, with a focus on semiconductor lasers and high-powered lasers. The remainder of the optics and optical products businesses were folded into a new photonics group, and features technologies like optical amplifiers and pump lasers.
Among these three segments, performance products represents about 25% of II-VI's overall sales, with the remainder split fairly evenly across photonics and laser solutions. In terms of profitability, lasers delivered a 21.3% operating margin in the first quarter while the other two segments hovererd around the 6% mark. However, segment margins fluctuate from one quarter to the next. For example, performance products would have been II-VI's most profitable division if this structure had been in place a year ago.
In a press statement, II-VI CEO Fran Kramer outlined a handful of technical advances and operating improvements before getting to the real point: "Most importantly, we've regained our financial momentum and look forward to a strong performance in fiscal year 2016," Kramer said.
II-VI shares have gained 25% during the last 52 weeks, anchored by a strong second-quarter report in January.