Analogic Corp. :ALOG-US: Earnings Analysis: Q2, 2017 By the Numbers : March 22, 2017

Analogic Corp. reports financial results for the quarter ended January 31, 2017.

We analyze the earnings along side the following peers of Analogic Corp. – OSI Systems, Inc., L3 Technologies, Inc., Hologic, Inc., Boston Scientific Corporation, Varian Medical Systems, Inc., Agilent Technologies, Inc., Integer Holdings Corporation and Sparton Corporation (OSIS-US, LLL-US, HOLX-US, BSX-US, VAR-US, A-US, ITGR-US and SPA-US) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of USD 131.53 million, Net Earnings of USD 7.51 million.
  • Gross margins narrowed from 45.97% to 43.86% compared to the same period last year, operating (EBITDA) margins now 14.81% from 8.52%.
  • Year-on-year change in operating cash flow of 175.96% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings growth from operating margin improvements as well as one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2017-01-31 2016-10-31 2016-07-31 2016-04-30 2016-01-31
Relevant Numbers (Quarterly)
Revenues (mil) 131.53 121.12 138.05 127.98 127.87
Revenue Growth (%YOY) 2.87 5.37 -10.63 -4.18 -4.54
Earnings (mil) 7.51 2.53 8.77 4.97 -2.99
Earnings Growth (%YOY) 351.59 83.94 -19.37 -45.53 -130.37
Net Margin (%) 5.71 2.09 6.35 3.88 -2.33
EPS 0.59 0.2 0.7 0.4 -0.24
Return on Equity (%) 5.59 1.9 6.62 3.79 -2.27
Return on Assets (%) 4.76 1.6 5.48 3.1 -1.9

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Market Share Versus Profits

Revenues History
Earnings History

ALOG-US‘s change in revenue this period compared to the same period last year of 2.87% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that ALOG-US is holding onto its market share. Also, for comparison purposes, revenues changed by 8.60% and earnings by 196.72% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s gross margins showed no year-on-year improvement. In spite of this, the company’s earnings rose, influenced primarily by the improvement in operating margins (EBITDA margins) from 8.52% to 14.81%. For comparison, gross margins were 42.63% and EBITDA margins were 18.10% in the last period.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

ALOG-US‘s decline in gross margins has not produced any significant offsetting improvement in its working capital . This leads Capital Cube to conclude that the decline in gross margins are likely from operating issues and not trade-offs with the balance sheet. Working capital days are currently 223.88 days, compared to last year’s level of 223.21 days.

Gross Margin Versus Working Capital Days

Quadrant label definitions. Hover to know more

Customer Financed, Cash Starved, Supplier Financed, Cash Rich

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

ALOG-US‘s change in operating cash flow of 175.96% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings

Margins

The company’s earnings growth has also been influenced by the following factors: (1) Improvements in operating (EBIT) margins from 4.11% to 9.23% and (2) one-time items. The company’s pretax margins are now 7.21% compared to -1.56% for the same period last year.

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

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Company Profile

Analogic Corp. provides healthcare and security technology solutions to advance the practice of medicine and save lives. It operates through three segments: Medical Imaging, Ultrasound and Security Technology. The Medical Imaging segment includes systems and subsystems for computed tomography and magnetic resonance imaging medical imaging equipment as well as state-of-the-art, selenium-based detectors for screening of breast cancer and other diagnostic applications in mammography. The Ultrasound segment includes ultrasound systems and transducers primarily in the urology, surgery, anesthesia, and point-of-care markets. The Security Technology segment includes advanced threat detecting computed tomography systems utilizing its expertise in advanced imaging technology, primarily used in checked baggage screening at airports worldwide. The company was founded by Bernard Marshall Gordon in November 1967 and is headquartered in Peabody, MA.

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