In a wide variety of industries, the use of lasers has increased substantially, making it crucial for companies to have the latest and most efficient technology to streamline production capabilities. That has been good news for laser maker IPG Photonics (NASDAQ:IPGP), whose fiber lasers offer considerable advantages for many users over conventional laser technology. Coming into Tuesday morning's first-quarter financial report, IPG Photonics shareholders believed that the company would continue its string of strong earnings growth, and the laser maker delivered on those expectations -- albeit with some caveats that attentive investors will want to look at more closely. Let's dig into the latest results from IPG Photonics and what they mean for the remainder of 2015.
IPG Photonics keeps aiming its lasers higher
In the eyes of some investors, IPG Photonics' results were actually mixed. Sales jumped 17% to $199 million, which was a bit lower than the consensus among those following the stock, who were looking for just under $201 million in revenue for the quarter. Earnings of $1.08 per share beat expectations by a dime, as net income soared 42% from year-ago figures on a big jump in demand for the company's high-power fiber lasers. Yet some pointed to the fact that the figures included a foreign-exchange benefit of $0.11 per share, without which the company wouldn't have met the consensus estimate for quarterly earnings.
Nevertheless, across its various segments IPG Photonics posted solid gains in most areas. Materials processing revenue climbed 18%, with the company citing expanding demand for products that help with various processing functions, including 3-D printer-related additive manufacturing operations, as driving results higher. Welding sales climbed as customers found new ways to use IPG Photonics products in their businesses, and international sales of cutting products were noteworthy as well. Meanwhile, high-powered laser sales rose 14%, and IPG Photonics said that revenue for its medium-power, pulsed, quasi-continuous wave and laser-systems businesses were also higher.
Geographically, IPG Photonics managed to buck many of the negative trends in the global macroeconomic picture, citing strength not only in the U.S. market but also in China and Europe as well. Sales in Japan and Russia, on the other hand, were somewhat weaker, reflecting the impact of currencies there as well as relative weakness in those economies.
CEO Dr. Valentin Gapontsev made his enthusiasm about the company clear. "IPG delivered another strong quarter," Gapontsev said, "and we are off to a terrific start this year." The executive was particularly pleased with margin expansion, which helped contribute to outpaced income gains.
What's next for IPG Photonics?
Just as it did last quarter, IPG Photonics issued future guidance that gave investors some hope for better results in the coming quarter. The company believes that it will post revenue of $215 million to $225 million in the second quarter, comparing favorably with the $218 million that most investors currently expect. Earnings of $1.05 to $1.15 per share are also on the high end of the $1.07-per-share consensus figure for the second quarter.
Gapontsev believes that IPG Photonics should be able to continue its strong order flow into the foreseeable future. His comments on the company's overall goals were nearly unchanged from those he made last quarter, as he cited IPG Photonics' focus on "gaining share in our established materials processing applications, developing new product applications that will expand our available market, and applying our lasers in large scale and novel applications beyond our core applications in materials processing."
IPG Photonics' results didn't inspire any big move in early trading following the announcement, with the stock remaining fairly close to its highs of the year. If the laser maker continues to see economic conditions improve around the world and takes advantage of better conditions in the U.S. market, though, IPG Photonics should keep delivering long-term gains for shareholders well into the future.
Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends IPG Photonics. The Motley Fool owns shares of IPG Photonics. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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