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21 Feb 2023
Machine vision pioneer's stock price drops 13% following latest financial update.
Cognex, the Massachusetts-based company that specializes in machine vision technology, has reported sales of just over $1 billion in 2022 - down 3 per cent on the figure for 2021.
That translated to a 21 per cent decline in annual income, while weaker than expected bookings amid a slowdown in investment by some of the firm’s largest customers will hit Cognex’s growth prospects in 2023.
Although still confident of hitting long-term growth targets, CEO Rob Willett told an investor conference call:
“We are navigating through a challenging business environment. A few of our largest e-commerce customers have paused most of their investments. At the end of 2022, we observed slower trends across our broader factory automation business, and we have seen this carry [on] into the beginning of 2023.
“Looking beyond this temporary pause, we continue to expect logistics to be our highest-growth end market over the mid- to long-term.”
EV battery inspection
For the closing quarter of 2022, sales of $239 million were also slightly lower than the final three months of 2021, although that was partly due to currency effects.
“Outside of logistics, revenue from the remainder of our end markets grew in 2022 roughly in line on a constant-currency basis with what we would expect over the long term,” reported Willett, who is targeting long-term annual sales growth of 15 per cent for Cognex.
“As our history demonstrates, we can experience periods of softness in between periods of robust growth.”
However, as with other providers of optics and photonics technologies, the automotive sector is providing a boost to business currently as it transitions to electric vehicle (EV) production.
“Our largest end market in 2022 was automotive, which represented approximately 25 per cent of our revenue,” Willett pointed out. That proportion is up from 20 per cent in 2021.
A particularly significant automotive application for Cognex is EV battery inspection, where it is critical to identify scratches and other defects that may pose a fire risk.
That market is part of the rationale behind the company’s recent acquisition of Karlsruhe, Germany-based computational lighting firm Sirius Advanced Cybernetics (SAC).
“Combining SAC's capabilities with Cognex's vision and AI tools equips us with an industry-leading offering for battery inspection,” said Willett. “The acquisition will support our strategy to capture a larger share of the high-growth battery inspection market.”
Lighting is considered key to battery inspection because it illuminates small defects on surfaces that could result in safety-critical failures if undetected, explained Cognex when it completed the SAC deal in December.
Slow period
Looking ahead, the Cognex executive team is expecting sales of between $180 million and $200 million for the opening quarter of 2023 - a result that would represent a stark decline from $282 million posted for the first three months of 2022, although that represented an unusually strong opening quarter for the company.
“As we manage through this slow period, we remain focused on the long term,” said Willett.
“We have important new product launches coming up this year. These products bring powerful, easy-to-use technology which expands the number of customers we can serve. And we are investing in our sales and marketing organization to reach more of these emerging customers.”
• Following the update Cognex’s stock price dropped in value by close to 13 per cent on the Nasdaq, giving up all of the gains made since the start of 2023.
Currently trading at around $47, the stock equates to a market capitalization in the region of $8 billion.
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