Rogers Corp. :ROG-US: Earnings Analysis: Q3, 2016 By the Numbers : November 17, 2016

Rogers Corp. reports financial results for the quarter ended September 30, 2016.

We analyze the earnings along side the following peers of Rogers Corp. – Park Electrochemical Corp., Benchmark Electronics, Inc., Vishay Intertechnology, Inc., II-VI Incorporated, Universal Display Corporation, Rubicon Technology, Inc., 3M Company, Kimball International, Inc. Class B, Handy & Harman Ltd. and Sparton Corporation (PKE-US, BHE-US, VSH-US, IIVI-US, OLED-US, RBCN-US, MMM-US, KBAL-US, HNH-US and SPA-US) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of USD 165.26 million, Net Earnings of USD 16.07 million.
  • Gross margins widened from 37.18% to 37.47% compared to the same period last year, operating (EBITDA) margins now 19.77% from 19.80%.
  • Year-on-year change in operating cash flow of 85.41% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings growth due to contribution of one-time items.

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

2016-09-30 2016-06-30 2016-03-31 2015-12-31 2015-09-30
Relevant Numbers (Quarterly)
Revenues (mil) 165.26 157.49 160.57 152.93 160.37
Revenue Growth (%YOY) 3.05 -3.44 -2.72 3.52 -1.65
Earnings (mil) 16.07 5.38 14.93 6.58 12.46
Earnings Growth (%YOY) 28.98 -60.29 9.55 -6.2 -38.91
Net Margin (%) 9.72 3.41 9.3 4.3 7.77
EPS 0.88 0.29 0.82 0.36 0.67
Return on Equity (%) 10.34 3.52 9.99 4.53 8.47
Return on Assets (%) 6.9 2.23 6.3 2.8 5.21

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Market Share Versus Profits

Revenues History
Earnings History

ROG-US‘s change in revenue this period compared to the same period last year of 3.05% 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 ROG-US is holding onto its market share. Also, for comparison purposes, revenues changed by 4.93% and earnings by 198.77% 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 earnings growth has been influenced by the year-on-year improvement in gross margins from 37.18% to 37.47%. However the company’s overhead costs have prevented it from fully capitalizing on these gross margin improvements. In fact, the company’s operating margins (EBITDA margins) showed no improvement over the same period last year.

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

ROG-US‘s improvement in gross margin has been accompanied by an improvement in its balance sheet as well. This suggests that gross margin improvements are likely from operating decisions and not accounting gimmicks. Its working capital days have declined to 186.76 days from 195.65 days for the same period last year.

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?

ROG-US‘s change in operating cash flow of 85.41% 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 operating (EBIT) margins contracted from 14.38% to 14.13%. In spite of this, the company’s earnings rose. This was influenced primarily by one-time items, which improved pretax margins from 13.75% to 14.47%.

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

Access our Ratings and Scores for Rogers Corp.

Company Profile

Rogers Corp. engages in the designing, developing, manufacturing, and selling engineered materials and components for mission critical applications. It operates through the following segments: Advanced Connectivity Solutions (ACS), Elastomeric Material Solutions (EMS), Power Electronics Solutions (PES) and Others. The Advanced Connectivity Solutions segment includes designing, developing, manufacturing and selling of circuit materials enabling connectivity for applications including communications infrastructure. The Elastomeric Material Solutions segment offers designing, developing, manufacturing and selling elastomeric material solutions for critical cushioning, sealing, impact protection and vibration management applications including general industrial, portable electronics. The Power Electronics Solutions involves in the designing, developing, manufacturing, and selling of ceramic substrate materials for power module applications. The Others segment consist of elastomeric components for applications in ground transportation, office equipment, and consumer. The company was founded by Peter Rogers in 1832 and is headquartered in Rogers, CT.

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