IPG (IPGP) Down 7.6% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for IPG Photonics (IPGP). Shares have lost about 7.6% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is IPG due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
IPG Photonics Q3 Earnings & Revenues Increase Y/Y
IPG Photonics delivered third-quarter 2021 earnings of $1.40 per share, up 112% year over year, and beat the Zacks Consensus Estimate by 8.5%. Favorable forex movement benefited the bottom line by four cents.
Revenues of $379.2 million increased 19.1% on a year-over-year basis and beat the consensus mark by 2.8%.
The company noted that the results were driven by growth in demand in welding applications across most geographies. Higher revenues in cutting in North America and Europe, as well as emerging products and applications such as foil cutting, cleaning, 3D printing, drilling, medical and solar cell applications, drove the strong revenue growth in the quarter. This fully negated the weak demand in cutting applications in China.
Quarterly Details
Materials processing (91% of total revenues) revenues increased 19% year over year. The upside can be attributed to higher demand for welding, marking and additive manufacturing applications.
Revenues from other applications increased 17% year over year due to higher medical sales.
Sales of high-power CW lasers were down 4% year over year. Pulsed and medium-power lasers’ revenues increased, driven by growth in emerging products and applications.
Sales increased 50% in Europe and 55% in North America but decreased 7% in China, on a year-over-year basis.
IPG Photonics reported a gross margin of 49%, which expanded 100 basis points (bps) on a year-over-year basis.
Operating margin came in at 26.9% compared with the year-ago quarter’s figure of 13%.
Balance Sheet & Cash Flow
As of Sep 30, 2021, IPG Photonics had $1.519 billion in cash & cash equivalents and short-term investments compared with $1.497 billion as of Jun 30, 2021.
As of Sep 30, 2021, total debt (including current portion) came in at almost $35.1 million compared with $36.1 million as of Jun 30, 2021.
Guidance
For fourth-quarter 2021, IPG Photonics anticipates sales to be $330-$360 million. Earnings are projected between $1.00 per share and $1.30 per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -6.27% due to these changes.
VGM Scores
Currently, IPG has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, IPG has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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