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Why Shares of IPG Photonics Soared Today

By Timothy Green – Oct 27, 2016 at 1:05PM

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The laser and amplifier company posted a strong quarter, and its guidance suggests a return to more rapid growth.

Image Source: IPG Photonics.

What happened

Shares of high-performance laser and amplifier manufacturer IPG Photonics (IPGP -1.39%) surged on Thursday following the company's third-quarter report. At 3 p.m. EDT, the stock was up about 10%.

So what

IPG reported third-quarter revenue of $266 million, up 9% year over year and about $11 million higher than the average analyst estimate. Sales of materials processing products rose 10% year over year, driven primarily by strong demand for cutting and welding products. High-power fiber laser sales rose 17% year over year, producing a record quarter for the company. Other laser categories saw sales drop by a single-digit percentage.

EPS came in at $1.29, up from $1.18 during the prior-year period and $0.05 better than analysts were expecting. Gross margin dropped by 30 basis points, to 54.4%, while operating margin dropped by 140 basis points, to 35.4%. A lower tax rate compared to the prior-year period helped offset the drop in margins.

According to  CEO Valentin Gapontsev:

We are seeing strong momentum in our business as we enter the final quarter of our fiscal year. We have significant opportunities to expand our business through both existing and new OEMs and end-users as we develop innovative products to address applications beyond our core markets. While the fourth quarter can be seasonally weaker, we believe we are well positioned for continued strong year-over-year sales and earnings growth and are confident in our short- and long-term opportunities.

Now what

IPG expects to produce revenue between $255 million and $270 million during the fourth quarter, representing 17% year-over-year growth at the midpoint. EPS is expected in the range of $1.17 to $1.32, up from $1.13 in the prior-year period.

After a few quarters of slower revenue growth, the fourth quarter promises to bring IPG's growth rate back into the double digits. This strong guidance, along with an across-the-board beat, gave investors a good reason to bid up the stock price.

Timothy Green has no position in any stocks mentioned. The Motley Fool owns shares of and recommends IPG Photonics. 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.

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