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IPG Photonics (IPGP) Tops Q3 Earnings on Robust Sales Growth
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IPG Photonics Corporation (IPGP - Free Report) reported third-quarter 2017 earnings of $2.11 per share, beating the Zacks Consensus Estimate by 32 cents and advancing 64.1% year over year. The figure was better than management’s guidance of $1.70-$1.90.
Foreign exchange transaction losses negatively impacted earnings by a nickel, which was fully offset by 6 cents of tax benefits.
The strong growth was driven by higher sales, which surged 47.6% from the year-ago quarter to $392.6 million. The figure outperformed management’s range of $350-$370 million.
Materials processing sales jumped 52.1% year over year and accounted for approximately 95.4% of total sales driven by strength in cutting and welding applications. Record lasers sales for 3D printing applications also drove growth.
IPG Photonics Corporation Price, Consensus and EPS Surprise
IPG is benefiting from strong adoption of fiber lasers over conventional lasers and non-laser cutting and welding equipment. According to management, higher productivity and lower operating cost of fiber lasers are accelerating the replacement of the installed base of CO2 and YAG laser systems.
The year-over-year sales growth was driven by robust performance in China, Europe, Turkey and Korea with strong demand across a variety of applications and industries. Apart from strong order flow, the growth benefited from strong execution in capacity planning, production & operations management, customer credit management and global administration.
IPG’s stock has returned 115.7% year to date, substantially outperforming the 76.2% rally of the industry.
China Continues to Drive Growth
China reported strong sales, which were up 70% year over year and represented almost 45% of total sales. The robust performance was driven by strong sales of high-power CW lasers for cutting and welding applications. The company also benefited from strength in QCW laser sales primarily related to consumer electronics welding applications.
Sales in Europe and the United States increased 50% and 13%, respectively, whereas it declined 10% in Japan from the year-ago quarter. Sales in Japan were hurt by softness at the company’s largest customer.
Europe benefited from strength in high-power lasers for cutting and welding applications, medium-power lasers for 3D printing applications, pulsed laser sales for marking and engraving as well as high-power pulsed lasers for marking, engraving, and solar cell manufacturing.
Sales in the United States benefited from robust systems and high-power pulsed lasers sales partially offset by lower sales of high-power lasers into automotive welding applications. ILT acquisition contributed meaningfully to domestic sales.
However, sales hit record level in Turkey on rapid growth in high-power lasers for cutting applications and accessories sales. Korea also reported robust sales on the back of solid performance from automotive and battery welding, marking and engraving and applications related to semiconductor, electronics and display manufacturing.
Product Details
Sales of high-power CW lasers soared 59.6% year over year to $244.2 million driven by rapid growth in cutting and welding applications. Management noted that demand for 6 kilowatt and above lasers for cutting applications continued to gain significant momentum.
Sales of QCW lasers surged 103.8% year over year to $29.5 million driven by strong growth in fine welding for consumer electronics applications.
Medium-power CW laser sales increased 21.6% as increased demand for fine welding and 3D printing offset softness in cutting. Management noted that within the lower-end cutting applications, many OEMs are moving away from medium-power to high-power lasers at 1 and 1.5 kilowatt.
Pulsed lasers sales grew 15.8% year over year. Sales of new green and high-power pulsed lasers across a diverse set of applications drove results. Sales of low-power pulsed lasers for marking and engraving applications were up by a low single-digit percentage.
Other products sales increased 31.5% year over year due to strong sales growth in systems and accessories.
Operational Details
IPG posted gross margin of 57.2%, which expanded 280 basis points (bps) on a year-over-year basis and surpassed the management’s range of 50-55%. This was primarily due to improved manufacturing efficiency, cost reductions and favorable product mix that fully offset lower average selling price (ASP).
As a percentage of sales, sales & marketing expenses decreased 50 bps, R&D expenses decreased 120 bps and G&A expenses decreased 80 bps.
As a result, operating income expanded 540 bps from the year-ago quarter to 40.8%.
Balance Sheet & Cash Flow
During the third quarter, IPG generated $164 million in cash from operations and used $56 million to finance capital expenditures. In the previous quarter, the company generated $82.3 million in cash from operations and used $21.8 million to finance capital expenditures.
IPG ended the quarter with $1.05 billion in cash & cash equivalents and short-term investments, representing an increase of $120 million from Jun 30, 2017.
During the quarter, IPG bought back 17K shares for $3 million.
Outlook
IPG expects sales in the range of $330-$355 million for the fourth quarter of 2017, reflecting 18-27% growth from the year-ago quarter. Management expects anticipated slowdown in spending related to consumer electronics investment cycle and typical seasonality in China to hurt revenues.
Earnings are projected in the range of $1.55-$1.80 per share, which reflects an increase of 12-30% from the year-ago quarter.
Management now expects 37-39% sales growth (up from 32-34%) for 2017.
IPG anticipates capital expenditure for 2017 in the range of $100-$110 million, or approximately 8% of revenues, up from $90-$100 million previously.
For 2018, management believes capital expenditure is more likely to be at the higher end of the company’s 8-12% target range.
Facebook , Autohome (ATHM - Free Report) and Twitter are stocks worth watching in the broader sector with the same Zacks Rank as IPG.
Long-term earnings growth rate for Facebook, Autohome and Twitter is currently pegged at 25.6%, 18.8% and 21.5%, respectively.
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IPG Photonics (IPGP) Tops Q3 Earnings on Robust Sales Growth
IPG Photonics Corporation (IPGP - Free Report) reported third-quarter 2017 earnings of $2.11 per share, beating the Zacks Consensus Estimate by 32 cents and advancing 64.1% year over year. The figure was better than management’s guidance of $1.70-$1.90.
Foreign exchange transaction losses negatively impacted earnings by a nickel, which was fully offset by 6 cents of tax benefits.
The strong growth was driven by higher sales, which surged 47.6% from the year-ago quarter to $392.6 million. The figure outperformed management’s range of $350-$370 million.
Materials processing sales jumped 52.1% year over year and accounted for approximately 95.4% of total sales driven by strength in cutting and welding applications. Record lasers sales for 3D printing applications also drove growth.
IPG Photonics Corporation Price, Consensus and EPS Surprise
IPG Photonics Corporation Price, Consensus and EPS Surprise | IPG Photonics Corporation Quote
IPG is benefiting from strong adoption of fiber lasers over conventional lasers and non-laser cutting and welding equipment. According to management, higher productivity and lower operating cost of fiber lasers are accelerating the replacement of the installed base of CO2 and YAG laser systems.
The year-over-year sales growth was driven by robust performance in China, Europe, Turkey and Korea with strong demand across a variety of applications and industries. Apart from strong order flow, the growth benefited from strong execution in capacity planning, production & operations management, customer credit management and global administration.
IPG’s stock has returned 115.7% year to date, substantially outperforming the 76.2% rally of the industry.
China Continues to Drive Growth
China reported strong sales, which were up 70% year over year and represented almost 45% of total sales. The robust performance was driven by strong sales of high-power CW lasers for cutting and welding applications. The company also benefited from strength in QCW laser sales primarily related to consumer electronics welding applications.
IPG Photonics Corporation Revenue (Quarterly YoY Growth)
IPG Photonics Corporation Revenue (Quarterly YoY Growth) | IPG Photonics Corporation Quote
Sales in Europe and the United States increased 50% and 13%, respectively, whereas it declined 10% in Japan from the year-ago quarter. Sales in Japan were hurt by softness at the company’s largest customer.
Europe benefited from strength in high-power lasers for cutting and welding applications, medium-power lasers for 3D printing applications, pulsed laser sales for marking and engraving as well as high-power pulsed lasers for marking, engraving, and solar cell manufacturing.
Sales in the United States benefited from robust systems and high-power pulsed lasers sales partially offset by lower sales of high-power lasers into automotive welding applications. ILT acquisition contributed meaningfully to domestic sales.
However, sales hit record level in Turkey on rapid growth in high-power lasers for cutting applications and accessories sales. Korea also reported robust sales on the back of solid performance from automotive and battery welding, marking and engraving and applications related to semiconductor, electronics and display manufacturing.
Product Details
Sales of high-power CW lasers soared 59.6% year over year to $244.2 million driven by rapid growth in cutting and welding applications. Management noted that demand for 6 kilowatt and above lasers for cutting applications continued to gain significant momentum.
Sales of QCW lasers surged 103.8% year over year to $29.5 million driven by strong growth in fine welding for consumer electronics applications.
Medium-power CW laser sales increased 21.6% as increased demand for fine welding and 3D printing offset softness in cutting. Management noted that within the lower-end cutting applications, many OEMs are moving away from medium-power to high-power lasers at 1 and 1.5 kilowatt.
Pulsed lasers sales grew 15.8% year over year. Sales of new green and high-power pulsed lasers across a diverse set of applications drove results. Sales of low-power pulsed lasers for marking and engraving applications were up by a low single-digit percentage.
Other products sales increased 31.5% year over year due to strong sales growth in systems and accessories.
Operational Details
IPG posted gross margin of 57.2%, which expanded 280 basis points (bps) on a year-over-year basis and surpassed the management’s range of 50-55%. This was primarily due to improved manufacturing efficiency, cost reductions and favorable product mix that fully offset lower average selling price (ASP).
As a percentage of sales, sales & marketing expenses decreased 50 bps, R&D expenses decreased 120 bps and G&A expenses decreased 80 bps.
As a result, operating income expanded 540 bps from the year-ago quarter to 40.8%.
Balance Sheet & Cash Flow
During the third quarter, IPG generated $164 million in cash from operations and used $56 million to finance capital expenditures. In the previous quarter, the company generated $82.3 million in cash from operations and used $21.8 million to finance capital expenditures.
IPG ended the quarter with $1.05 billion in cash & cash equivalents and short-term investments, representing an increase of $120 million from Jun 30, 2017.
During the quarter, IPG bought back 17K shares for $3 million.
Outlook
IPG expects sales in the range of $330-$355 million for the fourth quarter of 2017, reflecting 18-27% growth from the year-ago quarter. Management expects anticipated slowdown in spending related to consumer electronics investment cycle and typical seasonality in China to hurt revenues.
Earnings are projected in the range of $1.55-$1.80 per share, which reflects an increase of 12-30% from the year-ago quarter.
Management now expects 37-39% sales growth (up from 32-34%) for 2017.
IPG anticipates capital expenditure for 2017 in the range of $100-$110 million, or approximately 8% of revenues, up from $90-$100 million previously.
For 2018, management believes capital expenditure is more likely to be at the higher end of the company’s 8-12% target range.
Zacks Rank & Other Picks
IPG currently has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Facebook , Autohome (ATHM - Free Report) and Twitter are stocks worth watching in the broader sector with the same Zacks Rank as IPG.
Long-term earnings growth rate for Facebook, Autohome and Twitter is currently pegged at 25.6%, 18.8% and 21.5%, respectively.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>