Lasers were once a thing for science fiction fans, but they've developed into very real tools for use in a wide variety of different applications. II-VI (NASDAQ:IIVI) has built an impressive vertically integrated laser production business that has put it near the top of its industry, and as demand for lasers has steadily risen, II-VI has been able to stay ahead of the competition and defy naysayers.

Coming into II-VI's fiscal first-quarter report, investors were hoping that the company would be able to sustain its strong performance even amid signs of potential economic headwinds. II-VI's results put most fears to rest, and it showed even greater opportunity for future growth for the laser maker.

Yellow robotic arm holding a laser that's being used on a vehicle door frame.

Image source: II-VI.

How II-VI started fiscal 2019

II-VI's fiscal first-quarter results were rock-solid. Revenue jumped 20% to $314.4 million, exceeding even the ambitious expectations of most of those following the stock. Adjusted net income climbed by 13% year over year to $37 million, and the resulting adjusted earnings of $0.56 per share exactly matched the consensus forecast among investors.

Fundamentally, II-VI saw most of its core metrics gain ground. A book-to-bill ratio of 1.04 pointed to strong ongoing demand for its laser products, up from 0.96 a year ago, and gains in operating margin pointed to greater overall efficiency. II-VI did see slight declines in gross margin and adjusted return on sales, but the figures weren't alarming.

II-VI's segments saw consistent revenue growth. Segment sales for the key photonics segment were up 16%, and that was the weakest of the three business units. Laser solutions saw a 21% year-over-year gain, while performance products enjoyed a 27% surge in segment revenue. From a bottom-line perspective, though, II-VI didn't see universal success, with photonics seeing a 21% slump in operating income even as performance products profit surged nearly 30% and laser solutions more than quadrupled its results from the previous year's fiscal first quarter. Book-to-bill ratios were best in the photonics arena, with laser solutions lagging slightly below the 1 level.

CEO Chuck Mattera gave a lot of extra information about the quarter. "The communications end market clearly remains strong for II-VI," Mattera said, "growing 20% year over year, [and] our military business grew 30%." The CEO also noted 10% growth in industrial end market revenue, and demand for 3D sensing capability more than tripled.

What's ahead for II-VI?

Positive trends show few signs of letting up. As Mattera noted, "Sales of SiC [silicon carbide] substrates grew more than 50%, and our increases in scale of SiC manufacturing position us well to capture longer term opportunities as 5G and electric vehicles ramp." Next-generation wireless networks are likely to incorporate II-VI technology with respect to gallium nitride radio-frequency communications devices, pointing to a long runway for faster growth ahead.

II-VI also gave encouraging guidance for the coming quarter. In the fiscal second quarter of 2019, II-VI expects that it will see revenue of $333 million to $345 million. That number was better than most had anticipated, and earnings guidance for $0.65 to $0.69 per share on an adjusted basis was also considerably above the $0.59-per-share consensus forecast among most of those following the stock.

Shareholders were quite pleased with the report, and the stock soared almost 20% in the trading session following the announcement. Concerns about the general state of the industrial economy haven't disappeared entirely, and some still think that II-VI could be vulnerable to a cyclical downturn. Yet at least for now, II-VI seems to be avoiding many of the pressures that have hit some of its rivals, and its overall strategic vision looks to promote further expansion for the foreseeable future.

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