As I write this, shares of IPG Photonics Corp. (IPGP) are rallying after the laser company posted record results for the first quarter. The stock has had a somewhat bumpy 2018 so far, but could these results be enough to break IPGP out of its current rut? Let’s find out.
If you haven’t heard of it, IPG is the world’s leading provider of high-power fiber lasers. These lasers are used in a variety of devices and applications, ranging from materials processing to broadband Internet to medical pumps. Fiber lasers are the next generation of laser technology and offer many advantages over traditional lasers. They are more energy efficient, they are easier to maintain and they last longer.
As companies upgrade their current technologies with fiber-laser applications, IPG Photonics business is growing, as demonstrated in this morning’s earnings report. Last quarter, IPG achieved the highest level of quarterly bookings in its history. Compared with Q1 2017, revenue jumped 26% to $359.9 million. Analysts were expecting sales of $345.9 million, so IPG posted a 4.0% sales surprise. Breaking it down by region, sales rose 29% in China and Europe, 39% in Japan and 3% in the United States.
Over the same period, net income rose 42% to $106.3 million, or $1.93 per share. This beat the $1.79 consensus EPS estimate by 7.8%. Foreign exchange gains added $0.07 to earnings per share. Looking ahead to the second quarter, IPG is expecting revenue to range between $400 million and $430 million, representing between 8% and 15% annual sales growth. The company is also targeting earnings per share between $2.05 and $2.35, representing between 7% and 23% annual earnings growth. This guidance is on the higher end of the Street view, which calls for $2.16 EPS on $407.5 million in revenue.
This was an excellent earnings report, so IPGP shares are rallying on the news. And I expect that the stock will continue to climb higher in the coming weeks. First, IPGP receives an A-rating in Portfolio Grader. It receives top marks for its Quantitative Grade and return on equity, and solid grades for sales growth, operating margin growth, earnings surprises and analyst earnings revisions. And, after these latest results have been added, I expect that its overall Fundamental Grade will improve.
I also currently recommend IPG in my Blue Chip Growth newsletter. The stock has risen a healthy 41% since I added it last summer, but I see plenty of upside potential from here. Keeping this in mind, IPGP is a Strong Buy.