Can IPG Photonics Keep Lighting Up the Laser Industry?

Red Raman fiber laser. Source: IPG Photonics.

Lasers used to be something you'd find only in science fiction. Over the years, though, lasers have played a more powerful role in science, industry, and technology, and IPG Photonics (IPGP 3.69%) has emerged as one of the strongest innovators in the business. With its heavy-duty lasers serving customers in the telecom, automotive, defense, and energy industries, IPG Photonics boasts unsurpassed fiber-optic technology that gives it a leg up on its competition. Coming into Friday morning's fourth-quarter financial report, IPG Photonics shareholders already have high expectations about how well the laser maker can do in 2015. Let's take an early look at IPG Photonics and how its coming report could shape the near future for the company.

Stats on IPG Photonics

Source: Yahoo! Finance.

How bright will IPG Photonics earnings shine?
Investors have grown more optimistic about IPG Photonics' earnings recently, boosting their fourth-quarter projections by $0.09 per share and making smaller increases in their views on 2015. The stock has soared 22% since mid-November, reflecting investors' rosier outlook.

Satellite laser applications. Source: IPG Photonics.

Much of the gains have come in just the past week and a half, as IPG Photonics gave investors a sneak peek at preliminary fourth-quarter results. The company said both revenue and net income would be higher than its prior guidance had suggested, with sales of about $207 million easily eclipsing the previous $190 million to $205 million range and earnings per share of $1.06 to $1.07 exceeding the top of its $0.86 to $1.01 per share range.

Interestingly, IPG Photonics has had significantly different experiences in a number of ways from many other companies that have reported so far in this earnings season. First, IPG Photonics actually expects a benefit from foreign-currency exposure, even as most companies have had to deal with earnings headwinds from the strong U.S. dollar. Also, IPG Photonics has performed strongly not just in the booming North American economy but also in its Asian and Western European markets, despite those regions having much weaker economic conditions that have dragged down many other companies.

Green laser. Source: IPG Photonics.

One key to IPG Photonics' continued success will be to identify new uses for its lasers. One area that could provide substantial growth is welding, which company executives are optimistic could spur gains similar to those in its cutting business. Industrial welding requires high power output, and that is something IPG Photonics has a lot of experience generating. With high-precision metal processing becoming increasingly important as industries such as aerospace take off, IPG Photonics will need to stake its claim to sustain its leadership role. Similarly, the company's ability to use new ultraviolet and green lasers could help boost its presence in the microprocessing market, and telecom and other industries could enjoy cyclical upticks to IPG Photonics' benefit. Many of these growth opportunities could last well beyond 2015.

In the IPG Photonics earnings report, look for any deviation from the preliminary results the company issued earlier this month. More important, you can expect a greater explanation than usual about the direction IPG Photonics sees itself going in 2015 and beyond, with strategic insight that could help guide your views on whether the stock can soar to new heights. For now, IPG Photonics is in a good position to benefit from greater interest in laser technology and all the applications the company has discovered for its products.