On Wednesday, Coherent Corp. (NYSE:COHR) agreed to sell its Aerospace and Defense business to Advent, a private equity investor, for $400 million.

Proceeds will be used to reduce debt and will be immediately accretive to Coherent’s EPS.

Coherent’s Aerospace and Defense designs and manufactures optical and laser systems for defense applications. The business includes approximately 550 employees and 10 geographic sites.

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“We are pleased to have reached this agreement with Advent. As part of our strategic portfolio optimization process, this transaction furthers our strategy to concentrate efforts on core growth markets and products,” said Jim Anderson, CEO of Coherent.

The deal is expected to close in the current quarter.

During the earnings call, Anderson said the decision to sell the business was made because it was not aligned with the company’s long-term strategic focus areas and did not support long-term financial targets.

Coherent reported quarterly earnings of $1 per share, which beat the analyst consensus estimate of 91 cents.

Revenue came in at $1.52 billion, which beat the analyst consensus estimate of $1.5 billion and is up from revenue of $1.31 billion from the same period last year.

Outlook 

Coherent expects first-quarter revenue to be between $1.46 billion and $1.6 billion.

On the earnings call, CEO Anderson said the current tariff policy remains unchanged from last quarter and is not expected to have a significant impact this quarter.

“Though we do not have full details yet, we believe President Trump’s recent announcement regarding semiconductor tariffs may present a competitive advantage for our business,” Anderson noted.

The semiconductor exemption covers many of the company’s products, such as transceivers, and with U.S. manufacturing operations, the company expects it could avoid the semiconductor tariff.

Analysts’ Reaction

Bank of America Securities downgraded Coherent from Buy to Neutral while raising its price forecast from $92 to $105. Needham reiterated its Buy rating with a $120 forecast, while Stifel also maintained a Buy but lifted its forecast from $100 to $118. Rosenblatt kept a Buy rating but trimmed its forecast from $150 to $135. Barclays maintained an Overweight stance and raised its forecast from $90 to $110.

Price Action: COHR stock is trading lower by 23.47% to $87.25 at last check Thursday.

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