XP Power Limited (LON:XPP) shares were on the slide in lunchtime trading Monday after its order intake for the fourth quarter fell year-on-year amid weakness in the sector.
In a trading update for the fourth quarter and year ended 31 December, the company said its order intake was £45.1mln, down 4% YoY, while the 12 months order intake rose 8% to £198.4mln.
Full-year trading update to be in-line with expectations
XP develops power control systems commonly used in electrical equipment.
While the firm had seen “healthy demand across the year” from its industrial, healthcare and technology markets, weakness in the semiconductor manufacturing equipment sector meant quarter-on-quarter orders and revenues had fallen.
Semiconductors, used in a wide variety of technological equipment, have been under pressure over the year as the ongoing trade dispute between the US and China has raised doubts over the Chinese economy and its dependency on high-end chips.
Fourth quarter revenue was up 14% YoY at £48.9mln.
Despite the slowdown, the company said it expected full-year trading to be in line with its expectations, adding that it did not expect the dividend for the fourth quarter to be less than 32p per share.
This would take the total dividend for the year to 84p, a YoY increase of 8%.
In its outlook for the coming year, XP said it was “not immune” from the macroeconomic conditions but new design wins and a “healthy” order book meant it expected further revenue growth in 2019.
Broker slashes target and EPS forecasts on order miss
In a note to clients, analysts at City broker Peel Hunt slashed their target price to 2,850p from 4,300p while reducing their earnings per share (EPS) forecasts for 2018 to 169.6p from 180.4p and cutting the pre-tax profit forecasts to £40.5mln from £42mln.
The broker said the downturn in semiconductor fabrication “reminds investors that there is a cyclical element to earnings” but added that the overall quality “justified a sector premium” as they reiterated their ‘buy’ stance.
Analysts also said the EPS change reflected a tax charge increase to 18% from 16%, adding that they continued to expect “substantial mitigation” of US trade tariffs.
XP Power shares were down 7.6% at 2,070p.