Coherent issues a grim earnings outlook, and its stock is tanking

Shares of Coherent Corp. tumbled 17% in after-hours trading Tuesday after the optoelectronics company issued a weaker-than-expected outlook for the quarter and year ahead.

The company anticipates adjusted earnings per share of 5 cents to 20 cents on revenue of $1 billion to $1.1 billion for the fiscal first quarter, it said Tuesday. Analysts tracked by FactSet were modeling 47 cents a share in adjusted earnings along with $1.17 billion in revenue.

For the full fiscal year, executives at Coherent

model $1 to $1.50 in adjusted EPS, along with $4.5 billion to $4.7 billion in revenue. The FactSet consensus was for $2.45 in adjusted EPS and $4.89 billion in revenue.

Coherent said that the outlook excludes “several hundred million dollars of additional revenue related to the recent surge in demand for Datacom transceivers for AI-driven data-center buildouts as the supply chain ramps incremental capacity to address industry demand.”

Further, the forecast “assumes no meaningful improvement in the macroeconomic environment,” including in China.

Executives in their shareholder letter cited “challenges associated with customer inventory adjustments and macroeconomic weakness,” which they view as “a transitory interruption of otherwise powerful secular trends,” like artificial intelligence.

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The company disclosed that some of its larger customers have changed their product plans, while other customers have shifted their capital-expenditure planning to account for higher interest rates.

“Finally, the ongoing geopolitical environment, including strains between the U.S. and other Western countries and China, is exacerbating the macroeconomic challenges,” Coherent said.

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The forecast overshadowed better-than-expected revenue and adjusted profit in the most recent period.

Coherent posted a fiscal fourth-quarter net loss of $178.2 million, or $1.54 a share, whereas it recorded net earnings of $43.6 million, or 23 cents a share, in the year-prior period. On an adjusted basis, Coherent earned 41 cents a share, down from 98 cents a share a year before but above the FactSet consensus, which was for 38 cents a share.

Revenue for the period increased to $1.21 billion from $887 million, whereas analysts were looking for $1.15 billion.

“We are taking the short-term challenges head-on and we have made some bold moves that are characteristic of a sustainable market leader,” the company added in its shareholder letter. “When we look past the horizon, we have never been more excited and optimistic about our future.”

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