IPG Photonics (IPGP) recently announced its third-quarter 2023 earnings report, beating analysts’ expectations. The company reported earnings of $1.16 per share, surpassing the Zacks Consensus Estimate by 14.9%. However, this figure represents a 21.1% decline compared to the previous year.
Despite beating earnings expectations, IPG Photonics experienced a decrease in revenues. The company reported revenues of $301.4 million, reflecting a 13.6% decline on a year-over-year basis. This missed the consensus mark by 3.68%. It’s worth noting that 42% of total revenues came from emerging growth product sales.
IPG Photonics’ revenue growth was impacted by unfavorable foreign exchange rates, which resulted in a 2% decline.
Year to date, IPG Photonics’ shares have declined by 11.6%, underperforming the Computer & Technology sector’s increase of 29.8%.
Key Highlights from the Quarterly Report
Materials processing, which accounted for 88% of IPG Photonics’ total revenues, decreased by 15% compared to the previous year. This decline can be attributed to lower revenues from cutting, welding, and marking applications in China.
Revenues from other applications also experienced a decline of 1% year over year. This was primarily due to lower revenues from advanced and telecom applications.
IPG Photonics reported a decrease in sales of high-power CW lasers, which were down 22% year over year. This can be attributed to lower demand in flat sheet cutting applications and reduced demand in welding applications.
Pulsed laser sales also declined by 25% year over year, primarily due to lower demand in marking and solar cell manufacturing applications.
Geographically, IPG Photonics experienced a decline in sales of 13% in North America and 28% in China. However, sales increased by 41% in Japan and 3% in Europe when compared to the previous year.
IPG Photonics reported a gross margin of 44.1%, representing a 100 basis point increase compared to the previous year.
Balance Sheet Overview
As of September 30, 2023, IPG Photonics had $1.10 billion in cash and cash equivalents. This remained unchanged from the previous quarter.
Guidance for Fourth-Quarter 2023
For the fourth quarter of 2023, IPG Photonics expects sales to be between $270 million and $300 million. Earnings per share are projected to range from 80 cents to $1.10.
Zacks Rank and Other Stocks to Consider
IPG Photonics currently holds a Zacks Rank #4 (Sell). However, there are several better-ranked stocks in the broader sector that investors may consider. These include eGain (EGAN), GoDaddy (GDDY), and Itron (ITRI), all of which hold a Zacks Rank #1 (Strong Buy).
eGain shares have declined by 33.9% year to date, and the company is set to report its first-quarter fiscal 2024 results on November 2.
GoDaddy shares have declined by 3.3% year to date, with the company set to report third-quarter 2023 results on November 2.
Itron shares have increased by 12.2% year to date, and the company is set to report third-quarter 2023 results on November 2.
While IPG Photonics surpassed earnings expectations for the third quarter of 2023, the company experienced a decline in revenues. The decrease can be attributed to various factors, including lower demand in specific applications and challenging market conditions in certain regions. As IPG Photonics navigates through these challenges, investors may consider exploring other options within the sector.
Disclaimer: The views and opinions expressed herein are solely those of the author and do not necessarily reflect the views of Nasdaq, Inc.