Throughout the laser manufacturing industry, we've seen companies deliver impressive results as the use of lasers throughout the industrial world has become more prevalent than ever. Coming into Thursday morning's fiscal second-quarter financial report, Rofin-Sinar Technologies (NASDAQ:RSTI) hoped to join its laser-company peers in producing solid growth, even as investors braced for a potential drop in revenue for the company. Even though Rofin-Sinar sales did contract during the quarter, it made the most of its profit opportunities, pointing the way toward better results in future. Let's look more closely at the latest from Rofin-Sinar to see how the company performed so well.
Rofin-Sinar focuses on the bottom line
Rofin-Sinar's fiscal second-quarter results were mixed from the viewpoint of meeting expectations of investors. Revenue fell 5% to $122.7 million, falling short of even the $125.1 million figure that those following the stock had hoped to see from Rofin-Sinar. Fortunately for the company, though, Rofin-Sinar made up for the revenue shortfall in its bottom-line results, with adjusted earnings of $0.31 per share topping the consensus figures by more than a third, almost doubling from the year-ago quarter.
A look at Rofin-Sinar's segments reveals where some of the weakest points were. The marking/micro segment was the only one of Rofin-Sinar's three major businesses to post sales declines, but the 15% drop in the division was enough to pull the entire company's sales downward. By contrast, macro sales climbed 3%, and sales of components jumped 16%.
Geographically, Rofin-Sinar saw similarly big disparities. The U.S. market was extremely strong, with North American sales climbing 22%. But Asian sales fell 1%, and Europe plunged 16%, with the strong dollar playing havoc on the company's results. With Rofin-Sinar getting less than a quarter of its sales from North America, the company is more vulnerable to currency impacts than some of its more U.S.-centered rivals.
Still, there were unquestionably positive elements to Rofin-Sinar's results. Order entry rose 11%, and backlogs hit the $160 million mark on a book-to-bill ratio of 1.15, indicating rising future demand for laser products. In particular, Rofin-Sinar highlighted demand for its high-power fiber lasers, which include cutting-edge technology that have made them attractive throughout the industry.
CEO Gunther Braun saw the results as a sign of greater success ahead. "Our strategic and technological initiatives are growing our business and improving profitability," Braun said, attributing better results to "a high sales level to the automotive sector, strong business from the machine tool and medical device industries, and an increased demand from the semiconductor sector."
Can Rofin-Sinar stay laser-focused?
Rofin-Sinar's guidance for the future looked equally impressive. Sales of $130 million to $135 million were within the range of what investors expect from the company, but earnings of $0.39 to $0.42 per share would be a nice upgrade from current consensus estimates. The company also pushed up its net income margin to about 8%, maintaining its revenue guidance for $515 million to $535 million.
One key aspect of Rofin-Sinar's future is whether the company will see interest rise in its newest offerings. The company launched its third generation of high-power fiber lasers recently, and Rofin-Sinar has gotten positive feedback from customers about the products. At the same time, FiLaser technology designed to help cut brittle material and dependable order activity for its high-power, carbon-dioxide lasers have also driven interest in the company. Between cost-containment measures and efforts to further diversify its laser portfolio by adding new applications for products like its ultrashort pulse lasers, Rofin-Sinar seems to be on track to take advantage of favorable conditions in the laser industry.
Rofin-Sinar shareholders were excited about the news, pushing shares up more than 10% early in the trading session following the announcement. With so much interest among industrial customers to integrate lasers into manufacturing processes to cut cost and boost productivity, Rofin-Sinar is in the right place at the right time to maximize its potential profit from the space.
Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends Rofin-Sinar Technologies. 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.