High-powered laser-maker IPG Photonics Corporation (IPGP +3.36%) was coming off a blockbuster year going into its fourth-quarter and full-year 2017 earnings report. The company's stock followed its stellar financial results higher, having more than doubled in 2017, and investors had high hopes that the trend would continue.
For the just-completed fourth quarter, IPG Photonics reported revenue of $361.1 million, an increase of 29% year over year. This beat analysts' consensus estimates for revenue of $347.2 million, while also exceeding the company's own forecast of $342.5 million at the midpoint of its guidance.
IPG Photonics delivered laser-hot results. Image source: Getty Images.
The tax man takes his share
Like many companies reporting lately, recently enacted U.S. tax legislation played havoc with the bottom-line numbers. IPGP reported net income of $52.95 million, a decline of 30% year over year, while earnings per share of $0.96 fell 31% from the prior-year quarter. IPG took a one-time tax charge that reduced net income by $49 million and earnings per share by $0.90. Excluding these charges to get an apples-to-apples comparison would have resulted in net income of $102 million, up 36% year over year, and diluted earnings per share of $1.86, an increase of 20% over the prior-year quarter.
Adjusted results beat analysts' consensus estimates for revenue of $347.2 million and earnings per share of $1.72.
|
Metric |
Q4 2017 |
Q4 2016 |
Year-Over-Year Change |
|---|---|---|---|
|
Revenue |
$361.1 million |
$280.1 million |
29% |
|
Operating income |
$148.3 million |
$105.2 million |
41% |
|
Adjusted earnings per share |
$1.86 |
$1.39 |
20% |
Data from SEC filings. Chart by author.
IPG reported that materials processing sales grew by 32% year over year and accounted for 94% of total revenue driven by growth in cutting, welding, and 3D printing applications.
High-powered laser sales jumped 40% year over year, while pulsed laser sales increased by 20% over the same period last year.
IPG saw double-digit year over year growth in China, Europe, North America, and Turkey, while seeing only modest growth in Japan.
Still impressive growth ahead
The company reported that its backlog of orders with firm shipping dates increased 44% year over year to $326 million. Its backlog of non-binding frame agreements increased by 123% over the prior-year quarter to $417 million -- though these are not firm purchase obligations.
This resulted in a strong book-to-bill ratio of 1.0. This ratio is widely used in technology circles and is an indicator of trends in the industry. A ratio at or above 1.0 is an indicator of strong demand, while less than one indicates weaker or declining demand.
"We capped off one of the strongest growth years in IPG's history with a record fourth quarter, driven by accelerating adoption of our high-power fiber lasers across our largest applications and geographies," said Dr. Valentin Gapontsev, IPG Photonics' chief executive officer.
A laser focus on the future
For the full year of 2018, IPG is forecasting revenue growth of 10% to 15%. This would result in 2018 revenue of $1.585 billion at the midpoint of its guidance. The company expects continued momentum in its core materials processing markets, while making additional progress in areas involving new applications. The company expects lower growth in its consumer electronics markets, but IPG believes that will be offset by stronger worldwide adoption of its technology.
For the first quarter, the company is forecasting revenue in a range of $330 million to $355 million, which would represent 20% sales growth at the midpoint of its guidance. This is ahead of Wall Street's expectations for $331 million. The company also expects to generate earnings between $1.62 and $1.87 per share, ahead of expectations.
While the company delivered impressive results, investors were likely hoping for a continuation of the significantly higher growth rates seen in recent years, causing the stock to fall in the wake of its financial report. It is important to remember that IPG is riding an important and ongoing trend that will likely continue to enrich the company's -- and shareholders' -- fortunes for years to come.
