Factors to Note Ahead of IPG Photonics (IPGP) Q3 Earnings

IPG Photonics Corporation IPGP is scheduled to report third-quarter 2020 results on Oct 30.

For the third quarter, IPG Photonics expects sales in the range of $280-$310 million. The Zacks Consensus Estimate for revenues is currently pegged at $301.2 million, which indicates a decline of 8.5% from the year-ago quarter’s reported figure.

Management projected earnings between 70 cents and $1.00 per share. The Zacks Consensus Estimate for earnings stands at 89 cents per share, which has remained stable in the past 30 days. The company had reported earnings per share of $1.07 per share in the third quarter of 2019.

IPG Photonics Corporation Price and EPS Surprise

IPG Photonics Corporation Price and EPS Surprise

IPG Photonics Corporation price-eps-surprise | IPG Photonics Corporation Quote

Factors to Note

Weaker demand trends for several product categories along with significant project delays across all the markets are likely to have exerted pressure on IPG Photonics’ third-quarter performance. Also, coronavirus crisis-led sluggishness across additive manufacturing in metal cutting end-market may have dented third-quarter profitability.

Nevertheless, in the second quarter conference call, management noted that industrial demand in China was recovering along with demand for high power CW and pulsed laser equipment. This is likely to have positively impacted third-quarter top line.

Incremental adoption of latest ultra-compact YLR-U series of lasers along with 30-kilowatt lasers and ultra-high-power optical heads is also anticipated to have contributed to the top line.

Moreover, continued strength in advanced applications, with robust demand for semiconductor and scientific applications, may have contributed to third-quarter performance.

Improving mix of ultra-high power single mode lasers and amplifiers for defense applications is likely to have favored the to-be-reported quarter’s performance. Moreover, momentum in higher power products in core materials processing domain and strength in new solutions hold promise.

IPG Photonics’ efforts to expand into new end-markets like advanced applications (3D Printing and micro-materials processing), electric vehicle battery processing and systems, ultra-high power cutting, and medical are also likely to have contributed to the to-be-reported quarter’s performance.

In fact, development of new medical applications utilizing fiber lasers for urological and dental procedures may have aided adoption of laser-based medical solutions. This, in turn, might have driven third-quarter performance.

In the second quarter, IPG Photonics witnessed strong growth in medical laser business. Notably, sales of medical lasers was up more than 150% on a year-over-year basis. The company has been ramping up sales of thulium fiber lasers solution and consumable fibers that are utilized in urology and other soft tissue applications. The momentum is likely to have continued in the third quarter driven by growth in medical device manufacturing and installed systems.

However, owing to COVID-19 crisis, IPG Photonics’ efforts to sell its ultraviolet, green, and ultrafast pulsed lasers in emerging micro processing applications markets has hit a roadblock. This might have negatively impacted the third quarter results.

Similarly, the company’s investments to extend the use of medical lasers for transformative new products including mid-infrared lasers for inspection, spectroscopy and sensing applications, and new medical treatments hold promise in the longer haul, it might have impeded the third-quarter performance.

Increases in shipping costs as well as and aggressive price competition in China are likely to have limited margin expansion in the to-be-reported quarter.

What Our Model Says

Our proven model doesn’t conclusively predict an earnings beat for IPG Photonics this time around. According to the Zacks model, a combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat.

IPG Photonics has an Earnings ESP of 0.00% and a Zacks Rank #3, which makes surprise prediction difficult. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks to Consider

Here are a couple of stocks that you may consider, as our proven model shows that these have the right combination of elements to post an earnings beat this quarter.

Avnet AVT has an Earnings ESP of +39.13% and it currently sports a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Fortinet FTNT has an Earnings ESP of +1.89% and it presently flaunts a Zacks Rank of 2.

Activision Blizzard ATVI currently has an Earnings ESP of +2.96% and a Zacks Rank of 2.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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