IPG Photonics Hits 52-Week High: What's Driving The Stock?

Share price of IPG Photonics Corp (NASDAQ:IPGP) rallied to a new 52-week high of $156.10, eventually closing a tad lower at $155.50 on Jul 14. This represents a strong one-year return of approximately 89.9%, better than the Zacks categorized Lasers-Systems and Components industry’s 83.4% over the same period.

The stock price momentum reflects IPG’s consistent execution driven by dominant position in the fiber lasers technology market, expanding product portfolio and accretive acquisitions. We note that the company has beaten estimates in three of the last four quarters with an average positive surprise of 6.12%.

Moreover, the company’s revenues have also beaten the Zacks Consensus Estimate over the trailing 12 months.

We also note that earnings estimates for fiscal 2017 have increased 4 cents to $5.95 over the last 30 days. Also, for fiscal 2018, estimates have increased 30 cents to $6.67 over the same time frame.

Currently, IPG sports a Zacks Rank #1 (Strong Buy). The company has a market capital of $8.35 billion and a long-term expected earnings growth rate of 19.67%.

What’s Backing the Rally?

Rising demand for laser technology from different sectors of the economy have expanded the scope of core material processing industries. IPG’s vertically integrated business model has helped it emerge as the strongest player in this field. Owing to the comparative advantages that it enjoys like power advantages, global scale, low cost and high quality, it has been instrumental in creating a strong barrier to entry.

The company has shown rapid growth across core products, applications and geographies. Increased demand for its products from China and Eastern Europe was witnessed in the first quarter. Laser-cutter manufacturing and fiber-optic communications categories have also demonstrated strong gains.

IPG expects revenues in the range of $320–$340 million for the second quarter of 2017. Earnings are projected in the range of $1.50–$1.70 per share. The mid-point of this guidance represents quarterly revenue and earnings growth of approximately 31% and 28%, respectively, on a year-over-year basis.

Other Stocks to Consider

Other stocks worth considering in the broader technology sector include Broadcom (NASDAQ:AVGO) , Lam Research (NASDAQ:LRCX) and Applied Optoelectronics (NASDAQ:AAOI) . All the three stocks have the same Zacks Rank as IPG. You can see the complete list of today’s Zacks Rank #1 stocks here.

Long-term earnings growth rates for Broadcom, Lam Research and Applied Optoelectronics are currently projected to be 13.57%, 16.44% and 18.75%, respectively.

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