Lasers have become a hot commodity, and users in the industrial sector have found applications for lasers that have stoked demand for the products. II-VI (NASDAQ:IIVI) has been able to cash in on laser demand, and that has made investors increasingly optimistic about the company's ability to accelerate its growth to new heights.

Coming into Tuesday's fiscal first-quarter report, II-VI investors had extremely high expectations about the company's ability to produce strong results. II-VI's numbers showed extremely good year-over-year growth, but declines compared to more recent periods seemed to make some of its shareholders nervous. Let's take a closer look at how II-VI did and what's coming down the road for the laser maker.

Yellow robotic arm wielding a laser in manufacturing an automobile doorframe.

Image source: II-VI.

II-VI looks for more growth

II-VI's fiscal first-quarter results looked good on their face. Revenue was up 18% to $261.5 million, which was slightly faster than the 15% growth rate that most investors were expecting to see. Adjusted net earnings did even better, climbing by nearly 40% to $22.7 million. That translated to adjusted earnings of $0.35 per share, which fell short of the consensus forecast for $0.36 per share among those following the company.

Despite that performance, the biggest concern for II-VI was that the quarter marked another sequential decline in revenue as well as weakness in other key figures. Sales fell 4% from the June quarter, with adjusted operating income down 11% and adjusted net earnings plunging 30%. The company's book-to-bill ratio also deteriorated, falling to 0.96, which is below the key level of 1 that marks balance between new orders coming in and old orders having gotten executed.

From a segment perspective, II-VI's photonics business continued to play a leadership role. Revenue was up 15% from year-ago levels and down just 2% from the June quarter, and operating income was higher by 40% compared to the fiscal first quarter of 2017. Performance products saw operating income more than double from year-ago levels on a 24% rise in revenue, although sequential performance was less impressive. The laser solutions business saw the weakest performance, with particularly sharp declines on the segment's bottom line due largely to acquisitions.

CEO Chuck Mattera celebrated what he saw as a victory. "[All of our segments] saw year-over-year growth in the end markets of materials processing, optical communications, and wireless communications," Mattera said, and "we did not experience as much seasonal softness as anticipated." The CEO didn't seem concerned at all about sequential declines.

Can II-VI do better?

II-VI has high hopes for the future. In Mattera's words, "We expect to see broad-based growth in fiscal year 2018, led by our core markets as well as our emerging markets, including 3-D sensing, [extreme ultraviolet] lithography, and the rapidly developing electric vehicle ecosystem."

Yet not all of II-VI's guidance raised the same level of optimism for those following the stock closely. For the fiscal second quarter of 2018, II-VI thinks that revenue will be between $272 million and $282 million, which would be better than the roughly $266 million that investors expect now. However, guidance for earnings of $0.35 to $0.38 per share would be below the consensus forecast for $0.40 per share.

Perhaps because of that guidance, investors didn't seem entirely satisfied with II-VI's report, and the stock fell almost 3% in the first hour of trading in the morning session following the announcement. Lasers have been a red-hot commodity in the industrial sector recently, and some of II-VI's competitors have found great success from their own approaches toward tackling the opportunities in the industry. II-VI will want to ramp up its game in order to take full advantage of the laser boom as long as it lasts.

Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool recommends II-VI. The Motley Fool has a disclosure policy.