It has been about a month since the last earnings report for IPG Photonics (IPGP). Shares have added about 13% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is IPG due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
IPG Photonics Q1 Earnings & Revenues Decline Y/Y
IPG Photonics Corporation reported first-quarter 2020 earnings of 68 cents per share, down 33% over the year-ago quarter.
Favorable foreign-exchange movement favored the bottom-line growth by 28 cents.
Revenues of $249.2 million fell 21% on a year-over-year basis. Unfavorable foreign-exchange movement reduced revenues by $2 million.
The Zacks Consensus Estimate for first-quarter earnings and revenues was pegged at 16 cents and $234 million, respectively.
Revenues by Application
Materials processing (87.5% of total revenues) declined 28% year over year to $218 million, due to soft demand for welding, cutting and marking applications.
Revenues from other applications (12.5%) improved 123% year over year to $31.2 million, driven by growing traction of advanced applications and devices utilized in medical procedures.
Revenues by Geography
Sales in United States and other North America (representing 27% of total sales) improved 4% year over year to $67.3 million.
However, sales in other Eastern Europe/CIS (23%) declined 17% from the year-ago quarter to $57.2 million. Moreover, sales in Germany (7%) slumped 7% from the year-ago quarter to $17.4 million.
Revenues from China (27.5%) fell 40% to $68.6 million. Sales in Japan (5.5%) declined 12% to $13.7 million year over year.
Sales in other Asia and Australia (approximately 9.2%) declined 28% year over year to $22.8 million.
Revenues from rest of the world (0.9%) soared 206% to $2.2 million.
Revenues by Product Group
Sales of high-power CW lasers (47.9% of total revenues) were down 33% from the year-ago quarter to $119.3 million, primarily owing to coronavirus crisis-induced weak demand, 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.
Medium-power CW laser sales (4.5%) slumped 28% year over year to $11.3 million. However, Pulsed lasers sales (12.8%) of $31.8 million improved 1% year over year.
Moreover, QCW lasers sales (4%) declined 30% year over year to $9.9 million.
Also, Laser and Non-Laser system sales (7.5%) of $18.6 million fell 43% from the year-ago reported figure.
Other revenues (23.4%), which include amplifiers, accessories, service, and parts, came in at $58.3 million, up 38% year over year.
IPG Photonics reported gross margin of 41.3%, which contracted 600 basis points (bps) on a year-over-year basis. This can be attributed to higher manufacturing cost and lower revenue base.
As a percentage of revenues, operating expenses contracted 230 bps from the year-ago quarter to 23.3%.
Operating margin contracted 370 bps year over year to 18%.
Balance Sheet & Cash Flow
As of Mar 31, 2020, IPG Photonics had $1.195 billion in cash & cash equivalents and short-term investments compared with $1.183 billion as of Dec 31, 2019.
As of Mar 31, 2020, total debt (including current portion) came in at $40.8 million, down from $41.7 million as of Dec 31, 2019.
The company generated $56.8 million in cash flow from operations compared with the previous quarter’s reported figure of $129.9 million.
The company repurchased stock worth $13 million during the first quarter. Capital expenditures came in at $18 million.
For second-quarter 2020, IPG Photonics anticipates sales in the range of $260-$290 million. Earnings are projected between 40 and 70 cents per share.
How Have Estimates Been Moving Since Then?
It turns out, estimates review flatlined during the past month. The consensus estimate has shifted 8.99% due to these changes.
Currently, IPG has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
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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