Amid a range of challenges, Cognex (NASDAQ:CGNX), which designs and manufactures imaging-based products, encouraged investors with an upgraded revenue guidance, sending CGNX stock more than 7% higher on Tuesday early afternoon. Previously, the company suffered a fire at one of its facilities, causing analysts to become pessimistic on its prospects.
However, just ahead of today’s triennial Analyst Day, Cognex disclosed in a press release on Monday afternoon that increased its revenue guidance for the third quarter of 2022. According to the release, “The company now expects revenue to be between $195 million and $205 million as compared to the company’s previous guidance of $160 million to $180 million, which was given on August 2, 2022.”
Further, the report went on to state that this increase “is primarily due to the company’s ability to fulfill customer demand sooner than anticipated due to strong progress in replenishing component inventory destroyed in the previously disclosed fire at the company’s primary contract manufacturer.”
“We are pleased that our hard work to procure new components has enabled us to fulfill customer demand faster than we expected,” said Cognex CEO Robert J. Willett. “We have taken the unusual step of updating our guidance on this one occasion as we recover from the fire and because we intend to cite the updated revenue guidance during Analyst Day.”
CGNX Stock Still Not Out of the Woods
According to Optics.org, Cognex disclosed the fire – which occurred on June 7 in Indonesia – destroyed a large portion of its component inventory, forcing it to write off assets worth $45 million. At the time, Willett stated that the “impact of the fire would also hit sales in the September quarter — to the tune of $80 million.”
Per Optics.org, “Of that total, $20 million of sales are thought to be unrecoverable, with the remaining $60 million set to be realized at some point in the future.” However, thanks to the aforementioned strong progress, the market bid up CGNX stock. Nevertheless, it’s not quite out of the woods.
During the assessment of the fire damage, Willett acknowledged that “a slowdown in demand from the logistics market, where after two years of heavy spending on automation driven by the surge in online shopping during the pandemic, the firm’s largest customer is now postponing investments in new fulfillment centers,” according to Optics.org’s description.
Cognex products include “machine vision systems, machine vision sensors, and barcode readers that are used in factories and distribution centers around the world where they eliminate production and shipping errors,” per its press release. Therefore, any economic slowdown could negatively affect CGNX stock.
Indeed, the underlying company hasn’t printed a great market performance so far this year. Inclusive of the recent spike, CGNX stock remains down nearly 42% on a year-to-date basis.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.