GEO Investing

Orbotech Ltd. (NASDAQ:ORBK) reported strong Q1 financial results, the stock did not react as expected. For this reason, GeoInvesting began to build a small position, stating as much via a premium tweet to our members:

“We see muted reaction to strong Q1 2015 earnings for $ORBK as buying opportunity.  Starting to build long position. #GeoCallToAction”

We plan to interview management next week and listen to the Q1 2015 conference call to determine if our bullish assumptions as substantiated.

ORBK provides “yield-enhancing and production solutions for printed circuit boards (PCBs), liquid crystal displays (LCDs), and semiconductor devices.”

Orbotech Guidance Above Estimates

The company’s strong Q1 2015 results included besting estimates and handily forging ahead of last year’s comps.  ORBK also provided Q2 guidance over analyst estimates.

  • Q1 2015 revenues of $185 million vs $105 million in the prior year and ahead of analyst estimates of $181.2.
  • Q1 2015 non-GAAP EPS of $0.48 vs $0.19 in the prior year and ahead of analyst estimates of $0.43.
  • The company provided Q2 2015 revenue guidance of $185 to $193 million, ahead of analyst Q2 2015 revenue estimates of $184.8 million.

We like companies that provide products/services to help their customers run a more efficient ship, especially in competitive environments. This often can lead itself to a highly recurring revenue business model.

“Our flat panel display business and semiconductor device division continued to perform strongly, reflecting healthy demand trends across product lines and customer segments. Consumer electronics is becoming an increasingly indispensable part of modern life, requiring ever smaller, thinner, faster, more flexible and even wearable devices. This inevitably gives rise to escalating manufacturing challenges, which Orbotech’s solutions are designed to solve, supporting both our customers and leading consumer electronics designers. The breadth and depth of our product offering, especially after the SPTS acquisition, enables us to benefit from the continually evolving and complex world of electronics.”

The company has logged in 3 quarters of strong sales and non-GAAP EPS growth, sales and EPS are expected to grow 26% and 131% respectively in 2015, and the consensus price target increased to $24.

While strong top and bottom line growth are expected to continue for Q2 2105, we must keep in mind that growth is expected to slow in the second half of the year, and moderate in 2016. However, the company’s recent performance of exceeding analyst estimates and its acquisition strategy may be enough to provide shares with support.

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