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IPG Photonics Corporation (IPGP - Free Report) reported third-quarter 2020 earnings of 66 cents per share, down 38% over the year-ago quarter. Management had projected earnings between 70 cents and $1.00 per share.
Notably, favorable foreign-exchange movement contributed 15 cents to the bottom-line growth but goodwill impairment charge reduced it by 63 cents.
Revenues of $318.4 million fell 3% on a year-over-year basis. IPG Photonics had anticipated revenues in the range of $280-$310 million.
The company delivered better-than-anticipated results as strong bookings growth in China drove performance. It witnessed modest uptick in order trends across Europe as well. The company anticipates gaining from strength in new products.
The Zacks Consensus Estimate for third-quarter earnings and revenues was pegged at 89 cents and $301.2 million, respectively.
IPG Photonics Corporation Price, Consensus and EPS Surprise
Materials processing (91% of total revenues) declined 5% year over year to $271.7 million, due to soft demand for welding, cutting and marking applications.
Revenues from other applications (9%) improved 24% year over year, driven by growing traction of advanced applications and solid uptick in devices utilized in medical procedures.
Quarter in Detail
Sales of high-power continuous wave ("CW") lasers (58% of total revenues) were flat with the year-ago quarter.
However, management noted growth in ultra-high power fiber lasers (6 kilowatts of power or greater), which represented 58% of all high power CW laser sales.
By geography, sales climbed 22% in China, and declined 10% in Europe, 41% in Japan and 26% in North America on a year-over-year basis.
Operating Details
IPG Photonics reported gross margin of 48%, which expanded 160 basis points (bps) on a year-over-year basis. This can be attributed to low-cost production capabilities despite lower revenue base.
Operating expenses surged 41.5% to $111.4 million. As a percentage of revenues, operating expenses expanded from 23.9% reported in the year-ago quarter to 35%.
Operating margin contracted 950 bps on a year-over-year basis to 13%.
Balance Sheet & Cash Flow
As of Sep 30, 2020, IPG Photonics had $1.302 billion in cash & cash equivalents and short-term investments compared with $1.249 billion as of Jun 30, 2020.
As of Sep 30, 2020, total debt (including current portion) came in at $38.9 million, down from $39.9 million as of Jun 30, 2020.
The company generated $70 million in cash flow from operations compared with the prior-quarter figure of $73.5 million.
The company repurchased stock worth $10 million during the third quarter. Capital expenditures came in at $25 million compared with $20 million in the prior quarter.
Bleak Guidance
Challenging business environment owing to global economic downturn amid coronavirus induced crisis remains a headwind. Nevertheless, management anticipates gaining from budding avenues across electric vehicle battery processing and advanced applications, and devices used in the medical industry. Moreover, momentum in higher power products in core materials processing domain and strength in new solutions hold promise.
For fourth-quarter 2020, IPG Photonics anticipates sales to be $290-$320 million. The mid-point of the guided range — $305 million — is lower than the Zacks Consensus Estimate, which is currently pegged at $312.75 million.
Earnings are projected between 75 cents and $1.05 per share. The mid-point of the guided range — 90 cents — is lower than the Zacks Consensus Estimate, which currently stands at 93 cents per share.
Zacks Rank & Stocks to Consider
Currently, IPG Photonics carries a Zacks Rank #3 (Hold).
Both CDW and Skyworks are scheduled to report their quarterly earnings on Nov 2, while Qorvo is set to report on Nov 4.
Long-term earnings growth rate for CDW, Skyworks and Qorvo is currently pegged at 13.1%, 12.66% and 12.35%, respectively.
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IPG Photonics (IPGP) Q3 Earnings & Revenues Decline Y/Y
IPG Photonics Corporation (IPGP - Free Report) reported third-quarter 2020 earnings of 66 cents per share, down 38% over the year-ago quarter. Management had projected earnings between 70 cents and $1.00 per share.
Notably, favorable foreign-exchange movement contributed 15 cents to the bottom-line growth but goodwill impairment charge reduced it by 63 cents.
Revenues of $318.4 million fell 3% on a year-over-year basis. IPG Photonics had anticipated revenues in the range of $280-$310 million.
The company delivered better-than-anticipated results as strong bookings growth in China drove performance. It witnessed modest uptick in order trends across Europe as well. The company anticipates gaining from strength in new products.
The Zacks Consensus Estimate for third-quarter earnings and revenues was pegged at 89 cents and $301.2 million, respectively.
IPG Photonics Corporation Price, Consensus and EPS Surprise
IPG Photonics Corporation price-consensus-eps-surprise-chart | IPG Photonics Corporation Quote
Revenues by Application
Materials processing (91% of total revenues) declined 5% year over year to $271.7 million, due to soft demand for welding, cutting and marking applications.
Revenues from other applications (9%) improved 24% year over year, driven by growing traction of advanced applications and solid uptick in devices utilized in medical procedures.
Quarter in Detail
Sales of high-power continuous wave ("CW") lasers (58% of total revenues) were flat with the year-ago quarter.
However, management noted growth in ultra-high power fiber lasers (6 kilowatts of power or greater), which represented 58% of all high power CW laser sales.
By geography, sales climbed 22% in China, and declined 10% in Europe, 41% in Japan and 26% in North America on a year-over-year basis.
Operating Details
IPG Photonics reported gross margin of 48%, which expanded 160 basis points (bps) on a year-over-year basis. This can be attributed to low-cost production capabilities despite lower revenue base.
Operating expenses surged 41.5% to $111.4 million. As a percentage of revenues, operating expenses expanded from 23.9% reported in the year-ago quarter to 35%.
Operating margin contracted 950 bps on a year-over-year basis to 13%.
Balance Sheet & Cash Flow
As of Sep 30, 2020, IPG Photonics had $1.302 billion in cash & cash equivalents and short-term investments compared with $1.249 billion as of Jun 30, 2020.
As of Sep 30, 2020, total debt (including current portion) came in at $38.9 million, down from $39.9 million as of Jun 30, 2020.
The company generated $70 million in cash flow from operations compared with the prior-quarter figure of $73.5 million.
The company repurchased stock worth $10 million during the third quarter. Capital expenditures came in at $25 million compared with $20 million in the prior quarter.
Bleak Guidance
Challenging business environment owing to global economic downturn amid coronavirus induced crisis remains a headwind. Nevertheless, management anticipates gaining from budding avenues across electric vehicle battery processing and advanced applications, and devices used in the medical industry. Moreover, momentum in higher power products in core materials processing domain and strength in new solutions hold promise.
For fourth-quarter 2020, IPG Photonics anticipates sales to be $290-$320 million. The mid-point of the guided range — $305 million — is lower than the Zacks Consensus Estimate, which is currently pegged at $312.75 million.
Earnings are projected between 75 cents and $1.05 per share. The mid-point of the guided range — 90 cents — is lower than the Zacks Consensus Estimate, which currently stands at 93 cents per share.
Zacks Rank & Stocks to Consider
Currently, IPG Photonics carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader technology sector are CDW Corporation (CDW - Free Report) , Qorvo (QRVO - Free Report) and Skyworks Solutions (SWKS - Free Report) . Qorvo sports a Zacks Rank #1 (Strong Buy), while CDW and Skyworks both carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Both CDW and Skyworks are scheduled to report their quarterly earnings on Nov 2, while Qorvo is set to report on Nov 4.
Long-term earnings growth rate for CDW, Skyworks and Qorvo is currently pegged at 13.1%, 12.66% and 12.35%, respectively.
Have You Seen Zacks’ 2020 Election Stock Report?
The upcoming election could be a massive buying opportunity for savvy investors. Trillions of dollars will shift into new market sectors after the election. The question is, which sectors will soar for each candidate? Zacks has put together a new special report to help readers like you target big profits.
The 2020 Election Stock Report reveals specific stocks you’ll want to own immediately after the results are announced – 6 if Trump wins, 6 if Biden wins. Past election reports have led investors to gains of +71%, +83%, even +185% in the following months. This year’s picks could be even more lucrative.
Check out Zacks’ 2020 Election Stock Report >>