FEI Company Earnings: Strong Dollar Continues to Hold Down Revenue

By Markets Fool.com

Overseas markets tend to provide a boost to U.S. companies, as they open up a whole new world of growth. However, those markets also open up a whole new world of problems, with foreign currency fluctuations typically among the biggest issues that companies face. FEI Company experienced that problem first hand on full display when the company reported first-quarter results.

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A look at the numbers
The impact of currencies was most noticeably felt on revenue, as FEI Company's first-quarter sales came in at $221 million. That was down 2.4% over the first quarter of 2014, and missed estimates by about $1 million.

However, revenue was in the middle of the company's guidance range of $215 million to $230 million. Further, if we exclude the impact of foreign exchange-rate changes, which amounted to about $15 million, the company's revenue would have grown 4%.

Earnings fared a bit better as FEI Company's net income was $28 million, or $0.66 per share. That was up from the $25 million, or $0.59 per share, the company earned in the first quarter of last year. Moreover, earnings beat analysts' estimates by $0.05, and came in $0.01 higher than the upper range of its own guidance.

Driving this better-than-expected number was margin improvement, as gross margin for the first quarter was 47.7%, which was up from 47% in the first quarter of last year. Meanwhile, operating margin was 16.4%, which was up nicely from the first quarter of last year when its operating margin was 13.6%. The boost in profitability came from increased customer adoption of new products.

FEI Company's backlog of orders hit $510 million in the first quarter, which is up from $495 million at the end of the first quarter of last year. However, that backlog was reduced by $21 million due to revaluation changes for foreign exchange rates. Meanwhile, bookings for the quarter were $216 million, which resulted in a book-to-bill ratio of 0.98-to-1 times, which is an indicator that growth is slowing down.

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A look ahead
While bookings might suggest a slowdown, that's not what FEI Company is seeing. Instead, the company noted that improved order flow from several of its large semiconductor customers is supportive of a view that 2015 will still be a solid year despite the headwind from currencies.

This was evidenced in the company's guidance, as it reiterated its full-year forecast seeing revenue growing by 4%-7% year over year. This includes a 5% impact from currencies, with earnings in a range of $3.40 to $3.70 per share, which is almost $1.00 per share more than it earned last year. Its confidence in meeting its guidance comes from its solid first-quarter results, as well as its expectations for a solid second quarter.

Looking ahead to thatquarter, the company sees revenue in a range of $216 million to $226 million, which includes a negative currency impact of about 6% compared to currencies in last year's second quarter. Meanwhile, earnings are expected to be in a range of $0.73 to $0.83 per share.

Investor takeaway
Overall, FEI Company delivered solid first-quarter results. While there was a noticeable impact from currencies, the company was able to produce better-than-expected profits. Meanwhile, the company reiterated its full-year guidance, as it still expects to deliver solid low single-digit revenue growth, and even more robust earnings growth despite the headwinds from a strong dollar.

The article FEI Company Earnings: Strong Dollar Continues to Hold Down Revenue originally appeared on Fool.com.

Matt DiLallo owns shares of FEI. The Motley Fool recommends FEI. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.