IPG Photonics Corporation (IPG Photonics (IPGP)) reported better-than-expected first-quarter results on Tuesday, but you wouldn't know it from the stock's performance. Shares dropped more than 27% as investors zeroed in on margin compression and a softer near-term outlook.
The laser technology company posted adjusted earnings per share of 29 cents, beating the analyst consensus of 27 cents. Revenue came in at $265.5 million, up 17% from a year ago and ahead of the $256.9 million Street estimate. Industrial solutions revenue surged 21% to $227.6 million, while advanced solutions slipped 5% to $37.9 million.
Emerging growth products made up 53% of total revenue, consistent with the prior quarter. Regionally, sales rose 14% in Asia, 27% in North America, and 4% in Europe compared to last year.
The bright spots, however, were overshadowed by a gross margin that contracted to 37.5% from 39.4% a year ago. Adjusted EBITDA climbed 8% to $35.2 million, but the margin story spooked the market.
CEO Mark Gitin tried to strike an optimistic tone: "Our book-to-bill was once again firmly above one in the first quarter, reflecting robust demand for our solutions despite elevated macroeconomic uncertainty."
On the legal front, IPG announced it had reached a global settlement with TRUMPF Laser- und Systemtechnik SE to resolve all patent litigation worldwide. The company said the agreement removes legal overhang across jurisdictions. IPG exited the quarter with $480.8 million in cash and equivalents.
But the outlook for the current quarter gave investors pause. IPG expects Q2 adjusted earnings per share of 25 cents to 55 cents, compared to the 38-cent analyst estimate. Revenue is forecast between $260 million and $290 million, versus the $275.8 million consensus.
At the time of publication, IPG shares were trading at $88.71, down 27.5% on the day.
