OSI Systems (OSIS) Misses Q2 EPS by 41c; Guides Well Below the Street

OSI Systems (NASDAQ: OSIS) reported Q2 EPS of $0.40, $0.41 worse than the analyst estimate of $0.81. Revenue for the quarter came in at $197 million versus the consensus estimate of $223.8 million.

GUIDANCE:

OSI Systems sees FY2016 EPS of $2.95-$3.02, versus the consensus of $3.78. OSI Systems sees FY2016 revenue of $900-945 million, versus the consensus of $988.55 million.

Mr. Chopra stated, “As expected, our Optoelectronics and Manufacturing division sales decreased year over year. However, operational improvements, together with a more favorable product mix and a migration to more profitable customers, resulted in a 9.4% operating margin, excluding the impact of impairment, restructuring and other charges. This represented our fifth consecutive quarter of year-over-year operating margin expansion.”

Mr. Chopra continued, “During the second quarter of the prior fiscal year, our Security division revenues included approximately $39 million from a Foreign Military Sale to the U.S. Department of Defense for use in Iraq, creating a difficult comparison for the current fiscal year. Our fiscal 2016 second quarter results were further impacted by the deferral of revenue recognition for equipment shipped during the quarter. As a result, we began the process of streamlining certain functions in the Security division. Actions already completed are expected to result in approximately $6 million of annual cost savings with further opportunities being considered. Security division bookings in the first half were up 272% over the prior year. These bookings, together with the ramp up of our turnkey program in Albania and a solid pipeline of opportunities, position the division well for a strong second half weighted to the fourth quarter based upon the anticipated timing of converting our backlog and opportunities into revenue.”

Mr. Chopra concluded, “During the second quarter, our Healthcare division sales were well below expectations. A variety of factors contributed to the performance. Management changes are in process to ensure we have the right leadership in place in our Healthcare division. Based upon a detailed review of our funnel of opportunities and product portfolio, we are optimistic that our Healthcare division sales will rebound during the second half of the fiscal year.

For earnings history and earnings-related data on OSI Systems (OSIS) click here.

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