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Nikon (NINOY) Q2 Earnings Match Estimates, Revenues Up Y/Y

Shares of Nikon NINOY declined 11.1% to date following the announcement of second-quarter fiscal 2019 results on Nov 8. Notably, the stock has lost 20.5% compared with the industry’s decline of 21.4% on a year-to-date basis.


The company reported earnings of 15 cents per share, which came in line with the Zacks Consensus Estimate.

Revenues of ¥168.7 billion ($1.51 billion) increased 6.8% year over year.

Earnings for the first-half of the year, which ended on Sep 30, surged 63.6% to ¥57.41 per share. Revenues increased 2.2% to ¥335.7 billion.

Segment Details

Imaging Products business revenues declined 14.8% year over year to ¥71.8 billion. The top line suffered due to decline across all product lines. Management stated that compact digital camera market and interchangeable lens type market continued to decline. However, demand for D850 is still high after a year of release. Additionally, demand for the newly launched Z 7 and D3500 is also good. For the first half of the year, which ended on Sep 30, revenues decreased 13.9% to ¥150.9 billion.

Precision Equipment business’ revenues surged 46.3% from the year-ago quarter to ¥62.6 billion. FPD Lithography business benefited from increased sales of large-sized panels including G10.5 and Gen 8, which was offset by decline in sales of mid-to-small size panels. In the first half of the year, revenues increased 24.1% to ¥121.6 billion.

Healthcare business revenues increased 13.4% from the year-ago quarter to ¥16.1 billion. The increase was due to international revenue growth from biological microscopes and retinal imaging diagnosis instruments. For the first half of the year, revenues increased 16.7% to ¥29.4 billion.

Industrial Metrology and Others business’ revenues increased 9.6% year over year to ¥18.3 billion. Increase in revenues from CNC video measuring devices and solid-state lasers contributed to Industrial’s revenue growth. Additionally, the segment also benefited from the company’s restructuring initiatives. In the first half of the year, revenues increased 13.1% to ¥33.7 billion.

Management noted that improvement in capital investment and increase in personal consumption in Japan led to gradual recovery of the economic situation in first half of the year.

Nikon Corp. Price, Consensus and EPS Surprise

Nikon Corp. Price, Consensus and EPS Surprise | Nikon Corp. Quote

Operating Details

Operating profit increased 9.4% year over year to ¥11.6 billion. In the first half of the year, operating profit increased 33% year over year to ¥30.6 billion, primarily due to efficient cost management and increased profitability of healthcare segment. This was offset by decline in profitability from imaging segment.

Operating margin expanded 20 basis points (bps) to 6.9% in the reported quarter. First-half operating margin expanded 210 bps to 9.1%.

Imaging Products business’ operating profit declined 89.7% year over year to ¥800 million, primarily due to increase in product development costs for the lenses and cameras launched in this September. In the first half of the year, operating profit declined 14.3% year over year to ¥13.2 billion.

Precision Equipment business’ operating profit surged 124.3% from the year-ago quarter to ¥15.7 billion due to increased sales of FPD Lithography of large-sized panels. In the first half of the year, operating profit increased 48.3% year over year to ¥29.8 billion.

Healthcare business’ operating loss was ¥200 million compared with loss of ¥100 million in the year-ago quarter. The loss was due to investments in retinal diagnosis systems and
regenerative medicine fields. In the first half of the year, operating loss was ¥2.3 billion compared with ¥2.1 billion loss in the year-ago quarter

Industrial Metrology and Others business’ operating profit declined 23.8% to ¥1.6 billion. Profit declined even after the company discontinued low profitable non-contact 3D metrology systems. In the first half of the year, operating profit surged 80% to ¥2.7 billion.

Balance Sheet

As of Sep 30, cash and cash equivalents were ¥415.2 billion compared with ¥388.4 billion of Mar 31.

In the first half of the year, net cash flow from operations was $51.8 billion compared with the year-ago quarter’s figure of $24.5 billion.

In the first half of the year, free cash flow was ¥31.2 billion compared with ¥7 billion in first half, which ended on Sep 30 2017.

Guidance

For fiscal 2019, revenues are projected to increase 23% to ¥740 billion. Operating income is estimated to increase 17.8% from the year-ago quarter to ¥74 billion, up ¥4 billion from previous guidance.

Free cash flow is projected to be ¥60 billion.

Segment wise, Imaging Products’ fiscal 2019 revenues are expected to decline 11.3% year over year to ¥320 billion, while operating profit is now expected to be ¥33 billion, up ¥4 billion from the previous guidance.

Precision Equipment business’ fiscal 2019 revenues are expected to jump 24.6% to ¥282 billion, while operating profit is expected to be ¥68 billion.

Healthcare business’ fiscal 2019 revenues are anticipated to increase 10.9% to ¥63 billion. Operating loss is projected to be ¥4 billion.
 
Industrial Metrology and Others business’ fiscal 2019 revenues are expected to increase 2.5% to ¥75 billion. Operating profit is expected to be ¥6 billion.

Zacks Rank & Other Stocks to Consider

Currently, Nikon sports a Zacks Rank #1 (Strong Buy).

Some other top-ranked stocks in the broader computer and technology sector are NetApp, Inc. NTAP, Twitter, Inc. TWTR and United States Cellular Corporation USM. All the three stocks sport the same Zacks Rank as Nikon. You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for NetApp, Twitter and United States Cellular Corporation is 14.1% 22.1% and 1%, respectively.

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