Coherent posts a blowout Q4 and aggressive guidance, yet shares dip 5%

Investing.com -- Coherent Corp. (NYSE: COHR) just dropped a phenomenal fourth-quarter report, blowing past Wall Street’s top- and bottom-line expectations and setting an aggressive bar for its fiscal 2027 (FY27) outlook. Yet, despite the blowout numbers, shares slid about 5% in premarket trading Thursday—a marked reversal after the stock surged 8% earlier in the day on the coattails of peer Lumentum’s strong results.

Coherent reported fourth-quarter results that exceeded analyst expectations, with adjusted earnings per share of $1.74 beating the consensus estimate of $1.62 by $0.12. Revenue reached $2.05 billion, surpassing the $1.98 billion estimate and marking a 34% increase YoY.

The photonics company issued first-quarter fiscal 2027 guidance above analyst expectations, projecting revenue of $2.2 billion to $2.4 billion versus the consensus of $2.13 billion. The midpoint of $2.3 billion represents an 8% increase over the consensus. Adjusted EPS guidance of $1.85 to $2.05 also exceeded the $1.77 estimate, with the midpoint of $1.95 coming in 10% above expectations.

"Fiscal 2026 was an outstanding year for Coherent, with record revenue, significant margin expansion, and non-GAAP EPS growth that was more than twice the rate of revenue growth," said Jim Anderson, CEO. "We enter fiscal 2027 with exceptional customer demand, expanding production capacity, and multiple new growth platforms beginning to ramp."

Fourth-quarter adjusted gross margin expanded to 40.2%, up 215 basis points YoY, while GAAP gross margin (GM) reached 38.5%, an increase of 277 basis points YoY. The company’s GAAP EPS of $1.19 improved by $2.02 compared to a loss of -$0.83 in the prior-year quarter.

CFO Sherri Luther noted that strong operational execution drove meaningful gross margin expansion and converted revenue growth into robust earnings growth. For the first quarter of fiscal 2027, the company expects adjusted gross margin between 39.5% and 41.5%.

The company projects first-quarter gross margins slightly above at 40.5%, operating expenses of $400 million to $420 million on an adjusted basis, with a tax rate between 18% and 20%.

"Outlook remains upbeat as revenue is expected to eclipse the $3B mark by the end of FY27," Barclays analyst Tom O’Malley said in a note. 

"While broad demand trends remain robust, GMs have been the main investor focus as lower margin transceiver demand ramps significantly and we suspect the marginal beat in both the qtr. and the guide for GMs left investors wanting more," he wrote. 

Vahid Karaahmetovic contributed to this report.