What happened

Shares of industrial lasers specialist II-VI (NASDAQ:IIVI) gained 38.1% in May, according to data from S&P Global Market Intelligence. The surge hinged on a single-day gain of 25%, which in turn was based on a fantastic third-quarter earnings report.

So what

II-VI's first-quarter sales nearly doubled year over year from $343 million to $627 million, while adjusted earnings fell 24% to $0.47 per share. Your average Wall Street analyst would have settled for earnings near $0.14 per share on revenue in the neighborhood of $575 million.

The company also reported record bookings and backlogs of unfilled orders, which allowed management to post fourth-quarter guidance well ahead of the consensus analyst outlook at the time.

Photo of 5 fiber lasers cutting through a sheet of steel.

Image source: Getty Images.

Now what

The merger with Finisar, which was completed in September 2019, explained II-VI's huge revenue jump and lower earnings. The company exceeded its own and Wall Street's expectations thanks to strong execution during the COVID-19 crisis.

"We've been told by one large OEM that U.S. [network] traffic increased in the first week of the nationwide shelter-in-place orders by more than the increase for the entire prior year," CEO Chuck Mattera said in the first-quarter earnings call. "I firmly believe that the beginning of a large and multiyear opportunity for II-VI is unfolding."

The completion of the Finisar merger couldn't have come at a better time. II-VI's stock has gained 55% over the last 52 weeks, but it still looks affordable at 17 times forward earnings estimates.

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