IPG Photonics Hits the Mark as Sales, Income Climb

By Markets Fool.com

Laser maker IPG Photonics (NASDAQ: IPGP) has worked hard to take opportunity of favorable conditions that have kept the laser industry growing in recent years. Even as economic conditions across the globe have been lackluster at best, customers have looked to upgrade their systems to take advantage of new technology. Coming into Thursday's third-quarter financial report, IPG Photonics shareholders expected that the company would be able to keep producing modest growth from its efforts, and IPG's results were actually even better than most investors were looking to see. Let's take a closer look at the latest from IPG Photonics and what it means for the laser-maker going forward.

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Image source: IPG Photonics.

IPG Photonics delivers record results

IPG Photonics' third-quarter results included some unprecedented numbers from the company. Revenue climbed 9% to a record $266 million, which was well above the high end of IPG's guidance range and exceeded the consensus forecast among investors by more than $10 million. Net income was also strong, climbing 10% to $69.2 million, and that produced earnings of $1.29 per share. That compared favorably to the $1.24 per share that investors were expecting.

Taking a closer look at how IPG Photonics performed, one of the things that stood out the most was the fact that the company didn't suffer from its typical seasonal downturn. IPG said that bookings stayed robust throughout the quarter, and that helped keep the company's book-to-bill ratio above the key level of 1 during the third quarter.

Looking at IPG Photonics' different businesses, the materials processing segment saw a 10% sales increase, with the company saying that core-cutting and welding applications were the strongest performers in the category. Sales of high-power fiber lasers jumped 17%, posting a record quarter. On the other hand, IPG did see sales in its medium-power, pulsed, quasi-continuous wave, and laser systems business fall by single-digit percentages on a year-over-year basis. Within its core customer base, IPG said that telecom provided the strongest sales boost, while lower sales came from the medical side of the business and from advanced applications.

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Geographically, IPG saw generally strong results. Growth was strongest in China, Japan, and Korea, with IPG overcoming currency-related impacts to boost its top line. Sales in Europe and North America were also up slightly, but at a slower pace of growth.

CEO Dr. Valentin Gapontsev kept his eyes squarely on the future. "We are seeing strong momentum in our business as we enter the final quarter of our fiscal year," Gapontsev said, and "we have significant opportunities to expand our business through both existing and new [original equipment manufacturers] and end-users as we develop innovative products to address applications beyond our core markets."

Can IPG Photonics keep growing faster?

Gapontsev was careful to emphasize that IPG Photonics still has some obstacles to overcome, yet he remained optimistic. "While the fourth quarter can be seasonally weaker," the CEO said, "we believe we are well positioned for continued strong year-over-year sales and earnings growth."

The guidance that IPG Photonics gave reflects that enthusiasm. The laser maker believes that it will bring in revenue of between $255 million and $270 million in the fourth quarter, and that would represent a sizable boost over the $252 million consensus forecast among those following the stock. Similarly, IPG's earnings range of $1.17 to $1.32 per share compares favorably with the $1.21 per share figure that most investors are expecting.

Investors in IPG Photonics celebrated the news, sending the stock soaring by more than 6% in pre-market trading following the announcement. As long as conditions in the laser industry remain as favorable as they have lately, IPG Photonics has the potential to keep leading the way and making the most of the opportunities for long-term business growth that it has identified and worked toward achieving.

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Dan Caplinger has no position in any stocks mentioned. The Motley Fool owns shares of and recommends IPG Photonics. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.