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Cognex Q4 results tops estimates despite weak macros, stock surges 4%

Cognex Corporation (NASDAQ: CGNX) reported stellar results for the fourth quarter despite weak macros. The company’s stock price jumped above 4% post the earnings beat in the extended trading hours. The board has declared a quarterly dividend of $0.05 per share payable on March 15, 2019. The record date has been set as March 1, 2019. Cognex’s stock has jumped 26% this year recovering from the 52-week low level recorded in December.

Revenue improved 6% to $193 million over the prior year due to a strong performance from logistics vertical but offset by customer electronics customers. Sales dropped 17% sequentially as the company has clinched a few large orders from its customer electronics clients last quarter. Top line numbers surpassed analyst estimates of $184.8 million. Earnings came in at $0.26 per share, up $0.04 over street expectations.

Keeping the long-term growth in mind, Cognex continues to invest sales and engineering teams which would be helpful in coming up with new products and broaden its reach globally. As a result of ongoing investments, Research, Development & Engineering (RD&E) expenses were up 7% over prior year and SG&A expenses rose 10% compared to Q4 2017 period.

Q1 2019 Outlook

Cognex expects revenue for the first quarter 2019 period to be in the range of $165 million to $175 million, which fell short of $177.03 million expected by the street. The muted revenue outlook was primarily due to the reduced spending from its customers in China and a slump in the automotive sector demand in the Americas region.

Related: Cognex’s revenue and profit declines in Q3 provides a weak outlook

Commenting on the 2019 business outlook, CEO Willett commented, “As we enter 2019, lower spending by our customers in China continues to slow our growth rate as it did at the end of 2018.” He also added, “Similar effects are now evident in other markets that we serve, most noticeably in the automotive sector in the Americas.”

China Worries

Most of the Cognex customers are from the factory automation segment, especially from the automobile and consumer electronics domains. Any slowness in spending from this domain would directly impact the company’s fortunes. The ongoing trade war between the US and China would have an impact on its Chinese customers resulting in lower spending due to tariff-related issues and muted demand.

As the adoption of emerging technologies like artificial intelligence and robotics enters the automation market, the company would benefit from the increased sale of its machine vision products from new and existing customers.

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