American Electric Technologies, Inc. (NASDAQ: AETI) Weathers The Storm


Though American Electric Technologies, Inc. (NASDAQ: AETI) managed to post 2Q2016 earnings and revenue that improved from the previous quarter and beat consensus estimate, the management said that operating environment remains challenging.

Given the unfavorable industry environment, CEO Charles Dauber said they were making certain adjustments that they believe will enable American Electric Technologies, Inc. (NASDAQ: AETI) to cope with the prevailing conditions.

Sale of non-core assets and reduction of workforce are some of the actions the company has recently taken to help it manage the difficult operating environment. A headcount reduction that AETI implemented in 2Q helped it to trim its fixed costs and SG&A expenses.

As part of the measures to preserve cash, AETI is pursuing a lean structure. With that, the company decided to monetize its manufacturing operations in South Coast Mississippi. CEO clarified at the recent earnings call that they have sold the operation and related assets of the facility to a local company.

How tough are things?

One indicator that things are tough for American Electric Technologies, Inc. (NASDAQ: AETI) can be seen in the sharp decline in the company’s backlog orders. The company finished 2Q2016 with backlog of $11.6 million. That compared with backlog of $19.6 million at the end of the prior quarter.

Financial results – American Electric Technologies, Inc. (NASDAQ: AETI)

Comparison of the financial results for the latest quarter and the same period last year also shows how AETI is struggling to generate sales and translate those sales into profit. The company reported EPS profit of $0.01, which improved from EPS loss of $0.36 in the prior quarter, but fell from EPS profit of $0.06 in the year-ago quarter. Nevertheless, the EPS in the latest quarter still beat expectations.

Revenue of $11.45 million in the latest quarter fell 7% YoY, but increase of 38% over the previous quarter and also surpassed the consensus estimate.

The source of topline boost

American Electric Technologies, Inc. (NASDAQ: AETI) explained that technical product orders placed in 4Q2015 were responsible for the topline improvement between the last two quarters. Strong performance at the company’s Brazilian M&I Electric also supported the topline in the latest quarter.

AETI said its international joint ventures contributed $0.2 million in net equity income in 2Q2016.


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