IPG Photonics (NASDAQ:IPGP) may be one of the most successful companies most investors have never heard of. IPG is the world's leading producer of high-power fiber lasers which are used in a wide variety of applications, including industrial, semiconductor, instrumentation, medical, scientific, defense, and entertainment. The stock has gained more than 1,200% over the past decade, and it's appreciated more than 50% since this time last year. Investors are hoping the company can keep its hot streak alive.
IPG Photonics is scheduled to release second-quarter 2018 results before the market open on July 31. Let's see how the company performed in its most recent quarter, and review a few things investors should look out for.
A strong start to the year
In the first quarter, IPG reported revenue of $359.9 billion, up 26% year over year. That handily beat analysts' consensus estimates of $346.35 million, and exceeded the high end of the company's own forecast of $330 million to $355 million. Net income jumped 42% year over year, producing earnings per share (EPS) that grew to $1.93, which sailed past expectations for $1.79 per share, and represented a 40% improvement over the prior-year quarter. It's also important to note that both the revenue and EPS results were first-quarter records for the company.
For the second quarter, IPG has forecasted revenue in a range of $400 million to $430 million, which would represent year-over-year growth of between 8% and 15%. The company is also expecting robust profitability, with diluted EPS expected to fall in a range of $2.05 to $2.35, an increase of between 7% and 23% over the prior-year quarter.
Analysts are similarly enthusiastic regarding the upcoming results. Consensus estimates call for revenue of $418.61 million, and EPS of $2.25, representing year-over-year growth of 13.3% and 17.8%, respectively. Note that both consensus numbers would fall near the midpoint of management's forecast.
Even in light of a blowout first quarter and a stronger than expected second-quarter forecast, IPG didn't update its full-year guidance, instead waiting to see how a number of macro trends play out. Manufacturing is subject to cyclical growth, and since the company's lasers are used in a variety of manufacturing applications, adoption can ebb and flow with economic cycles. Look to see if management's confidence is solid enough for IPG to expand its full-year forecast when it reports second quarter earnings.
Other things to watch
The company has a history of delivering a strong book-to-bill ratio, an indicator of future demand that is used to forecast the strength or weakness of industry trends. If the ratio falls below 1.0, it's indicative of weak demand, while 1.0 or higher is a gauge of strong demand.
In the first quarter, IPG reported the highest level of quarterly bookings in the company's history, resulting in a book-to-bill ratio above 1, positioning the company for a strong second quarter. Investors should watch closely to see if this ratio stays above 1.
A cut above
Manufacturers in competitive environments are increasingly turning to lasers to improve productivity and energy efficiency. IPG Photonics has a wide range of products that work across a growing array of applications and industries.
The organization started the year on the right foot, and the evidence suggests that its cutting-edge performance will likely continue into the second quarter.