A month has gone by since the last earnings report for IPG Photonics (IPGP Quick QuoteIPGP - Free Report) . Shares have lost about 12.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is IPG due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

IPG Photonics Q2 Earnings Beat, Revenues Improve Y/Y

IPG Photonics reported second-quarter 2022 earnings of $1.38 per share, which beat the Zacks Consensus Estimate by 23.21% and improved 3.8% year over year.

Revenues of $377.02 million increased 1% on a year-over-year basis and surpassed the consensus mark by 3.71%.

The company noted that the results were driven by higher sales in welding, cleaning and medical applications, offset by lower revenues in cutting applications.

The company’s top line was impacted by foreign exchange transaction losses of $18 million. The book-to-bill ratio was lower than 1 in the reported quarter due to moderate demand in Europe.

Quarterly Details

Materials processing (91% of total revenues) decreased 1% year over year. The downside was due to lower revenues in cutting and solar cell manufacturing applications. However, the company is experiencing rising demand for welding and cleaning applications.

Revenues from other applications increased 29% year over year due to higher sales in medical. However, sales of high-power CW lasers were down 14% year over year due to softer demand in China.

Sales surged 33% in North America, 43% in Japan, and 2% in Europe year over year. Meanwhile, the same declined 14% in China.

IPG Photonics reported a gross margin of 45.7%, which decreased 290 basis points (bps) on a year-over-year basis. The decrease in gross margin was on account of higher inventory reserves, shipping costs and tariffs, and lower manufacturing cost absorption, which was partially offset by the lower cost of products sold.

Operating margin came in at 19%, decreasing by 580 bps from the year-ago quarter.

Balance Sheet & Cash Flow

As of Jun 30, 2022, IPG Photonics had $771.89 million in cash & cash equivalents compared with $642.52 million as of Mar 31, 2022. Short-term investments as of Jun 30, 2022, were $462.86 million compared with $774.16 million as of Mar 31, 2022.

As of June 30, 2022, total debt (including the current portion) was nearly $32 million compared with $33.2 million as of Mar 31, 2021.

Cash flow from operations was $79 million in the second quarter compared with first-quarter 2022’s figure of $16 million.

In second-quarter 2022, IPG photonics returned $233 million through share repurchases.

Guidance

For third-quarter 2022, IPG Photonics anticipates sales to be $350-$380 million. Earnings are projected between $1 per share and $1.30 per share.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month.

VGM Scores

Currently, IPG has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

IPG has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.