It has been about a month since the last earnings report for IPG Photonics (IPGP). Shares have lost about 17.1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is IPG due for a breakout? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
IPG Photonics Q4 Earnings Beat, Revenues Improve Y/Y
IPG Photonics reported fourth-quarter 2021 earnings of $1.21 per share, which beat the Zacks Consensus Estimate by 0.83% and improved 32% year over year.
Revenues of $364 million increased 8% on a year-over-year basis and surpassed the consensus mark by 4.75%.
The company noted that the results were driven by growth in demand in welding applications across most geographies. Higher revenues in cutting in North America and Europe and emerging products and applications such as cleaning, 3D printing, advanced applications and telecom drove strong revenue growth in the quarter under review. This fully negated the weak demand in cutting applications in China.
Quarterly Details
Materials processing (87% of total revenues) increased 5% year over year. The upside can be attributed to higher demand for welding, marking and 3D printing.
Revenues from other applications increased 41% year over year due to higher medical, advanced applications and telecom sales.
Sales of high-power CW lasers were down 4% year over year. Pulsed and medium-power lasers’ revenues increased, driven by growth in emerging products and applications.
Sales surged 37% in Europe and 30% in North America on a year-over-year basis. Meanwhile, the same decreased 20% in China.
IPG Photonics reported a gross margin of 45.5%, which expanded 190 basis points (bps) on a year-over-year basis.
Operating margin came in at 23.3% compared with the year-ago quarter’s figure of 19.4%.
Balance Sheet & Cash Flow
As of Dec 31, 2021, IPG Photonics had $1.515 billion in cash & cash equivalents and short-term investments compared with $1.519 billion as of Sep 30, 2021.
As of Dec 31, 2021, total debt (including the current portion) came in at almost $34 million compared with $35.1 million as of Sep 30, 2021.
Guidance
For first-quarter 2022, IPG Photonics anticipates sales to be $320-$350 million. Earnings are projected between 85 cents per share and $1.15 per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
The consensus estimate has shifted -23.62% due to these changes.
VGM Scores
At this time, IPG has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren’t focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It’s no surprise IPG has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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