A tough quarter really isn't so bad when investors have been properly prepared and expectations are set at an appropriate level. Of course, it also doesn't hurt when a company sets the bar low enough to have good chance to outperform. That has seemed to be the case today with Motley Fool Hidden Gems recommendation Rofin-Sinar
Performance relative to expectations was definitely the key for laser maker Rofin-Sinar. Revenue was up about 6% for its fourth quarter, but both gross and operating margins eroded. Operating income fell about 10% from last year and net income was down 13%. Still, that was all better than the one lone estimate out there.
In a switch from the prior quarter, the company's sales of macro laser products were strong (up 12%) while sales of micro devices were comparatively weak (up 1%). Although Rofin-Sinar continues to experience some weakness in the machine tool industry (a major client base for the macro laser systems), sales to the automotive sector improved.
I've come to expect conservatism from this company. These are not the sort of folks who pound the table and try to rally investors with unwarranted enthusiasm or hyperbole. Accordingly, my hunch is that the next fiscal year could shape up at least a little better than management is forecasting -- particularly if the semiconductor equipment space recovers, as companies like ASML
So what should Fools do with these shares? I wouldn't be in any particular hurry to sell, or buy, the stock today. I like Rofin-Sinar quite a bit, but its heavy exposure to industrial markets is a reason for pause. Still, it does produce positive free cash flow, and I think patient investors still have rewards to come from these shares.
For more light on the industrial markets:
Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).
