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Factors Setting the Tone for IPG Photonics' (IPGP) Q4 Earnings

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Zacks Equity Research
·4 min read
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IPG Photonics Corporation IPGP is slated to release fourth-quarter 2020 results on Feb 16.

For the fourth quarter, IPG Photonics expects sales to be $290-$320 million. The Zacks Consensus Estimate for revenues is currently pegged at $274.7 million, which indicates a decline of 10.4% from the year-ago quarter’s reported figure.

Management projected earnings between 75 cents and $1.05 per share. The Zacks Consensus Estimate for earnings stands at 96 cents per share, which has remained stable in the past 30 days.

IPG Photonics Corporation Price and EPS Surprise

IPG Photonics Corporation Price and EPS Surprise
IPG Photonics Corporation Price and EPS Surprise

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

Factors to Note

IPG Photonics’ efforts to expand into new end-markets like advanced applications (3D Printing and micro-materials processing), electric vehicle battery processing and systems, ultra-high power cutting, and medical are likely to have contributed to the to-be-reported quarter’s performance.

In fact, development of new medical applications utilizing fiber lasers for urological and dental procedures may have aided adoption of laser-based medical solutions. This, in turn, is likely to have driven fourth-quarter performance.

In the third quarter, IPG Photonics witnessed strong growth in medical laser business. Notably, sales of medical lasers were up 30% on a year-over-year basis. The company has been ramping up sales of thulium fiber lasers solution and consumable fibers that are utilized in urology and other soft tissue applications. The momentum is likely to have continued in the fourth quarter driven by growth in medical device manufacturing and installed systems.

Notably, the company’s investments to extend the use of medical lasers for transformative new products including mid-infrared lasers for inspection, spectroscopy and sensing applications, and new medical treatments hold promise in the longer haul. However, this might have impeded margin expansion in the fourth quarter.

Nevertheless, incremental adoption of latest ultra-compact YLR-U series of lasers, and 30-kilowatt lasers and ultra-high-power optical heads is anticipated to have contributed to the top line.

Moreover, continued strength in advanced applications, with robust demand for semiconductor and scientific applications, may have contributed to the fourth-quarter performance.

Improving mix of ultra-high power single mode lasers and amplifiers for defense applications is likely to have favored the to-be-reported quarter’s performance. Further, momentum in higher power products in core materials processing domain and strength in new solutions hold promise.

Additionally, recovery across industrial demand in China for high power CW and pulsed laser equipment, is likely to get reflected in the fourth-quarter top line.

However, weaker demand trends for several product categories and stiff pricing competition, are likely to have put pressure on IPG Photonics’ fourth-quarter performance.

Also, coronavirus crisis-led sluggishness across additive manufacturing in metal cutting end-market, and weaker automotive domain, may have dented the to-be-reported quarter’s profitability.

What Our Model Says

Our proven model doesn’t conclusively predict an earnings beat for IPG Photonics this time around. According to the Zacks model, a combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat.

Although IPG Photonics has a Zacks Rank #2, an Earnings ESP of -1.04% makes surprise prediction difficult. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks that Warrant a Look

Here are some stocks that you may consider, as our proven model shows that these have the right combination of elements to post an earnings beat this quarter.

CrowdStrike Holdings Inc. CRWD has an Earnings ESP of +57.75% and carries a Zacks Rank of 2, currently. You can see the complete list of today’s Zacks #1 Rank stocks here.

Workday, Inc. WDAY has an Earnings ESP of +0.90% and a Zacks Rank #2.

Zacks #2 Ranked Corsair Gaming, Inc. CRSR has an Earnings ESP of +15.07%.

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