Factors Setting The Tone For IPG Photonics (IPGP) Q4 Earnings

IPG Photonics Corporation (NASDAQ:IPGP) is scheduled to report fourth-quarter 2019 results on Feb 13.

For the fourth quarter, IPG Photonics expects sales in the range of $270 million to $300 million. The Zacks Consensus Estimate for revenues is currently pegged at $286.79 million, indicating a decline of 13.1% from the year-ago quarter.

Management projected earnings in the range of 55-95 cents per share. The Zacks Consensus Estimate for earnings is pegged at 78 cents per share, suggesting a decline of 44.3% from the year-ago reported figure. Notably, the estimate declined 2.5% in the past 30 days.

Notably, the company beat the Zacks Consensus Estimate in one of the trailing four quarters, while missing the same thrice. The company has a four-quarter negative surprise of 3.14%, on average.

Factors at Play

Soft demand for high-power CW lasers across China and Europe owing to macroeconomic headwinds is likely to have affected on IPG Photonics’ fourth-quarter performance.

Particularly, weak demand across additive manufacturing and metal cutting applications in Europe has been resulting in a decline in average prices, which is likely to have weighed on profitability in the fourth quarter.

Sluggish demand for industrial automation equipment is likely to have negatively impacted fourth-quarter revenues.

Nevertheless, the company’s efforts to expand into new end-markets like advanced applications (3D Printing, Cinema, and micro-materials processing), communications and medical, is likely to reflect on the fourth quarter results.

In fact, development of new medical applications utilizing fiber lasers for urological and dental procedures is likely to have aided adoption of laser-based medical solutions and consequently benefited the fourth-quarter top line.

Notably, in the third quarter, IPG Photonics had witnessed strong growth in medical laser business, which doubled on a year-over-year basis, as the company received Food and Drug Administration (or FDA) approval for its thulium fiber lasers solution that are utilized in urologic applications. The trend is likely to have continued in the fourth quarter driven by the latest FDA approval.

Moreover, synergies from acquisition of Genesis are likely to get reflected in IPG Photonics’ fourth-quarter top line. Genesis' robotic systems integration capabilities are expected to have aided the company in extending laser processing offerings to industrial, aerospace and transportation end markets. Notably, Genesis contributed $20 million to total revenues in the third quarter.

Additionally, orders for 5 kilowatt and 10 kilowatt single-mode lasers, and 50 kilowatt and 60 kilowatt CW lasers, is anticipated to have benefited the fourth-quarter results.

However, expenses pertaining to reduce costs to deal with macroeconomic headwinds are likely to have limited margin expansion in the fourth quarter.

What Our Model Says

Our proven model does not conclusively predict an earnings beat for IPG Photonics this time around. The 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. But that’s not the case here.

IPG Photonics has an Earnings ESP of -16.49% and a Zacks Rank #4 (Sell). 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 few 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.

Alteryx, Inc. (NYSE:AYX) has an Earnings ESP of +6.49% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Alarm.com Holdings, Inc. (NASDAQ:ALRM) has an Earnings ESP of +1.15% and a Zacks Rank of 1.

Five9, Inc. (NASDAQ:FIVN) has an Earnings ESP of +1.02% and a Zacks Rank of 2.

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