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Laser components specialist IPG Photonics (NASDAQ: IPGP) reported second-quarter results on Thursday afternoon. Here's what you need to know about this solid quarterly update.
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IPG Photonics' Q2 results: The raw numbers
Source: IPG Photonics.
What happened with IPG Photonics this quarter?
IPG's strong revenue growth rested on rising orders in its materials processing and high-power laser segments.
- Sales of high-power lasers, which accounted for 56% of IPG's total revenues in the second quarter, rose 7% year-over-year to $141.4 million. Clients are snapping up enough tools for welding and cutting applications to overcome a 20% decline in average selling prices per kilowatt of laser power.
- Telecom sales drove a 28.9% revenue increase in IPG's "other markets" division. The recent acquisition of communications signaling expert Menara Networks was responsible for most of this boost, while one medical applications client submitted a significantly lower volume of laser orders.
- IPG Photonics saw sales increasing in each of its geographical segments, led by double-digit revenue growth in North America and China.
- The company also announced a new share repurchase program, limited to $100 million over the next two years and aimed at controlling the dilutive effects of share-based compensation. IPG is explicitly not looking to reduce its share count, just keeping that figure in check.
Management offered the following high-level guidance targets for the third quarter:
- Revenue should land near $252 million, roughly 3.5% above the comparable period in 2015.
- Earnings are seen rising 1%, landing near $1.20 per diluted share.
What management had to say
In the second half of 2016, IPG's management plans to build on its existing strengths with a range of brand-new products. Many of these will be targeted at markets outside the company's current wheelhouse, according to CEO Valentin Gapontsev:
IPG Photonics has been growing much faster than the laser industry at large in recent years. The company is finding new markets on a regular basis, while rivals Rofin-Sinar Technology (NASDAQ: RSTI) and Coherent (NASDAQ: COHR) have struggled to expand their horizons.
The company is executing crisply at the moment, and has been doing so for years. But share prices have only gained 40% over the last five years, while sales doubled and free cash flows increased more than fourfold.
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