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IPG Photonics (IPGP) Posts Q4 Loss, Revenues Decline Y/Y

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IPG Photonics Corporation IPGP reported fourth-quarter 2019 loss of 8 cents per share, against the year-ago quarter’s reported earnings of $1.40 per share.

Unfavorable foreign-exchange movement, higher inventory, and impairment charges pertaining to restructuring, goodwill and other assets, weighed on the bottom line by 99 cents.

Revenues of $306.6 million fell 7.1% on a year-over-year basis. Unfavorable foreign-exchange movement offset revenues by $2 million.

The Zacks Consensus Estimate for fourth-quarter earnings and revenues was pegged at 78 cents and $287 million, respectively.

Uncertainty in macroeconomic environment and geopolitical factors reduced demand for high-power CW lasers across China and Europe, which impacted the fourth-quarter revenues. However, Genesis acquisition contributed $19 million in total revenues in the reported quarter.

Revenues by Application

Materials processing (90.1% of total revenues) declined 10.5% year over year to $276.3 million.

IPG Photonics Corporation Price, Consensus and EPS Surprise

IPG Photonics Corporation Price, Consensus and EPS Surprise

IPG Photonics Corporation price-consensus-eps-surprise-chart | IPG Photonics Corporation Quote

Revenues from other applications (9.9%) improved 42.4% year over year to $30.4 million.

Revenues by Geography

Sales in United States and other North America (representing 23.9% of total sales) improved 30.5% year over year to $80.9 million.

However, sales in Eastern Europe/CIS (18.7%) declined 19.5% from the year-ago quarter to $57.3 million. Moreover, sales in Germany (7.1%) slumped 10% from the year-ago quarter to $21.9 million.

Revenues from China (30.2%) fell 21% to $92.6 million. Sales in Japan (5.5%) declined 36.8% to $16.9 million year over year.

Sales in other Asia and Australia (approximately 10.4%) improved 15.4% year over year to $32 million.

Revenues from rest of the world (1.6%) soared 513.5% to $4.9 million.

Revenues by Product Group

Sales of high-power CW lasers (51.3% of total revenues) were down 15.2% from the year-ago quarter to $157.4 million, primarily owing to weaker-than-expected demand in China and Europe, and decline in ASPs (or average selling price).

However, management noted that sales of 6 kilowatt or greater high power CW lasers represented 50% of all high power CW laser sales. Specifically, sales of 10 kilowatts or greater high power CW lasers improved 30% on a year-over-year basis.

Medium-power CW laser sales (4.5%) slumped 32.4% year over year to $13.7 million. Further, Pulsed lasers sales (10.3%) of $31.6 million declined 32.5% year over year.

However, QCW lasers sales (4.5%) improved almost 14% year over year to $13.8 million.

Moreover, Laser and Non-Laser system sales (12%) of $36.7 million surged 68.9% from the year-ago reported figure, primarily driven by synergies from Genesis acquisition.

Other revenues (17.4%), which include amplifiers, accessories, service, and parts, came in at $53.4 million, up 22.8% year over year.

Operating Details

IPG Photonics reported gross margin of 40.5%, declining from 50.5% reported in the year-ago quarter. This can be attributed to higher manufacturing cost and lower revenue base.

As a percentage of revenues, operating expenses expanded from 21.4% in the year-ago quarter to 40.4%, primarily owing to higher investments in sales, engineering and administrative expenses.

Consequently, operating margin contracted from 29.1% reported in the year-ago quarter to 0.1%.

Balance Sheet & Cash Flow

As of Dec 31, 2019, IPG Photonics had $1.18 billion in cash & cash equivalents and short-term investments compared with $1.08 billion reported in the previous quarter.

Total debt (including current portion) came in at $41.7 million, down from $42.6 million in the prior quarter.

The company generated $129.9 million in cash flow from operations compared with the previous quarter’s reported figure of $91.8 million.

The company repurchased stock worth $15 million during the fourth quarter.

Bleak Guidance for Q1

For first-quarter 2020, IPG Photonics anticipates sales in the range of $220-$250 million. The Zacks Consensus Estimate for revenues is currently pegged at $278.97 million.

Earnings are projected between break-even to 30 cents per share. The Zacks Consensus Estimate for earnings is currently pegged at 82 cents per share.

Zacks Rank & Stocks to Consider

Currently, IPG Photonics carries a Zacks Rank #4 (Sell).

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