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IPG (IPGP) Up 8.8% Since Last Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for IPG Photonics (IPGP - Free Report) . Shares have added about 8.8% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is IPG due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
IPG Photonics Q3 Earnings & Revenues Decline Y/Y
IPG Photonics Corporation 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.
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 to 13% from 22.5% reported in the year-ago quarter.
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.
Guidance
For fourth-quarter 2020, IPG Photonics anticipates sales to be $290-$320 million. Earnings are projected between 75 cents and $1.05 per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
VGM Scores
At this time, IPG has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise IPG has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
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IPG (IPGP) Up 8.8% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for IPG Photonics (IPGP - Free Report) . Shares have added about 8.8% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is IPG due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
IPG Photonics Q3 Earnings & Revenues Decline Y/Y
IPG Photonics Corporation 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.
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 to 13% from 22.5% reported in the year-ago quarter.
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.
Guidance
For fourth-quarter 2020, IPG Photonics anticipates sales to be $290-$320 million. Earnings are projected between 75 cents and $1.05 per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
VGM Scores
At this time, IPG has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise IPG has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.