Please ensure Javascript is enabled for purposes of website accessibility

Why IPG Photonics Rose 6% on a Down Week for Tech Stocks

By Billy Duberstein - May 6, 2022 at 3:32PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Better-than-feared earnings were key to IPG defying the market swoon.

What happened

Shares of IPG Photonics (IPGP -1.61%) rose as much as 9.4% on the week, before settling into a 6% weekly gain as of 2:46 p.m. ET Friday. That's especially impressive given the continued volatility in technology stocks this week.

IPG had a pretty rough start to the year, but delivered better-than-expected earnings on its first-quarter earnings report released Tuesday, May 3. With financial results coming in better than feared, it's no surprise shares found their footing in a tumultuous market.

So what

In the first quarter, IPG grew revenue 7% to $370 million, with earnings per share growing 4% to $1.31. Both figures came out well ahead of expectations.

IPG had been pummeled to start the year on fears of a global growth slowdown, which could hurt demand for its fiber laser welding products. Additionally, IPG had significant manufacturing operations in Russia; needless to say, that also presented the company with a big risk.

However, it looks as though management was able to navigate things rather well. CEO Eugene Scherbakov said in a statement: "We are pleased to report another solid quarter with growth driven by higher demand across many diverse applications in Europe, North America and Japan. Increased laser welding adoption, primarily in electric vehicle manufacturing, drove record welding revenue for IPG this quarter."

Scherbakov also said IPG was investing to expand its manufacturing footprint in the U.S. and Europe, while the company stops new investments in Russia. That being said, it appears manufacturing is still going on in the country.

The company continues to see strong booking orders, especially in the electric vehicle and medical device spaces; however, guidance for the current quarter was relatively flat from last quarter, with management projecting revenue of $355 million to $385 million and earnings per share of $0.95 to $1.25.

An industrial laser welds in a factory.

Image source: Getty Images.

Now what

IPG currently trades around 19 times both trailing and forward earnings estimates, but obviously earnings estimates are quite volatile, given the macroeconomic crosswinds. There's a lot of uncertainty on both the revenue and cost side, given the continued Russian footprint. However, the stock is trading near the bottom of its historical range for its P/E ratio.

IPGP PE Ratio Chart

IPGP PE Ratio data by YCharts

Fiber lasers should continue to gain share in a range of applications; therefore, while not the cheapest stock around, IPG looks like it's regained its footing amid a tumultuous global economy.

Billy Duberstein has no position in any of the stocks mentioned. His clients may own shares of the companies mentioned. The Motley Fool recommends IPG Photonics. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

IPG Photonics Corporation Stock Quote
IPG Photonics Corporation
$101.84 (-1.61%) $-1.67

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/08/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.