IPG Photonics Posts Modest Growth in 2019 Net Revenue

EMMETT WARREN, NEWS EDITOR
emmett.warren@photonics.com

IPG Photonics Corp. financial results for the fourth quarter of 2019, announced in mid-February, showed that fourth-quarter 2019 net income was a loss of $4 million, which included goodwill and asset impairment, inventory provision and restructuring charges that reduced net income by $53 million. after the company’s stock fell 40% and missed growth projections.

Total revenue of Q4 2019 was $307 million versus $330 million in the fourth quarter of 2018, while full-year 2019 revenue was $1.32 billion, compared to $1.46 billion in 2018.

Overall, the company generated $130 million in operating cash flow while Q4 revenue decreased by 7% year over year.

“We delivered fourth-quarter revenue slightly above our guidance range on strength in the U.S. market and new products,” said IPG CEO Valentin Gapontsev.

Between 2018 and 2019, IPG received criticism from analysts for failing to hit Wall Street earnings targets for six consecutive earnings reports. By the end of Q4, IPG’s stock had fallen 40% since the first of the six earnings reports was released in July 2018.

Anders Bylund of Motley Fool was optimistic of a turnaround for 2020 in his December 2019 analysis.

“IPG’s business fortunes are tightly tied to the ups and downs of the global economy,” Bylund said. “When times are good, manufacturing-grade lasers are in high demand and orders supporting the worldwide network of communications infrastructure are booming.”

When IPG released the Q4 results, remnants of its diminishing returns were still evident, with its gross margin reporting 10% lower than the previous year. But due to geopolitical climate and subverted expectations, the company managed to beat analyst expectations across the board (EPS $0.91 versus $0.80 estimates; revenue $307 million versus $288 million estimates).

IPG said in its press release that it expects revenue to grow in the first quarter of 2020 by a margin of 14%, from $220 million to $250 million while the predicted tax rate is approximately 26%. The company said it has faced a challenge in predicting estimates due to the outbreak of the novel coronavirus, which has made business in China uncertain.

“Ongoing business disruption related to the novel coronavirus outbreak makes forecasting our business in China and the impact on global demand very challenging at this point,” Gaponstev said. “China is a large and important market for IPG, with repercussions for other markets, and we continue to monitor the situation closely.”

IPG’s international market vertically integrated manufacturing model, with in-house LED development, has helped alleviate it from U.S.-China trade tariff wars, but Bylund said the viral outbreak will present a new challenge for the upcoming quarterly results.

“IPG is still a well-run company with a strong market position in key sectors like laser welding and processing of battery packs for electric cars, but forces outside the company’s control will weigh on the business for a while,” Bylund said. “How long? Even that is difficult to say today. Fingers crossed for an effective coronavirus vaccine, not just for IPG’s sake but for humanity in general.”