IPG Photonics (NASDAQ: IPGP) reported Q3 EPS of $1.84, $0.01 worse than the analyst estimate of $1.85. Revenue for the quarter came in at $356.3 million versus the consensus estimate of $355.48 million.

"Our third quarter results were affected by macroeconomic headwinds and geopolitical factors that reduced demand in China and Europe; nevertheless, IPG made significant strides driving higher power solutions into the market and generating meaningful traction selling our newest products," said Dr. Valentin Gapontsev, IPG Photonics' Chief Executive Officer. "Despite the challenging environment, we shipped a record number of ultra high power lasers and successfully introduced the world's smallest 20 kilowatt cutting laser and most compact and power efficient 1-3 kilowatt product lineup. We delivered strong growth in our newest laser products and systems as the company continues to broaden its solutions portfolio. We believe our progress in higher power solutions and new products will help us emerge from the current downturn in a stronger competitive position with greater opportunity to address the growing market for laser solutions."

Business Outlook and Financial Guidance

"Global macroeconomic and geopolitical headwinds have persisted into the fourth quarter affecting our business along with others in the sector. As a result, order flow has continued to soften. We continue to see aggressive pricing for select products by our competitors in China, and we expect currency headwinds to be greater in the fourth quarter than in the third quarter. However, we have made strides competitively selling several hundred more high power lasers during the third quarter to manufacturers of laser cutting systems in China that were either exclusively or predominantly buying lasers from our competition. We are encouraged by this progress and the strength in new products and other regions." said Dr. Gapontsev.

For the fourth quarter of 2018, IPG expects revenue of $300 million to $330 million. The Company expects the fourth quarter tax rate to be approximately 26%, excluding effects relating to equity grants. IPG anticipates delivering earnings per diluted share in the range of $1.30 to $1.50, with 53.6 million basic common shares outstanding and 54.7 million diluted common shares outstanding. Based on this guidance, the company expects to deliver full year revenue growth for 2018 of 1% to 4%.

"We believe there are some encouraging signs for 2019. Indications from several customers in China suggest that order flow may improve in the first quarter. We expect spending on consumer electronics, electric vehicle battery and other metal welding projects to increase in 2019 over 2018. In addition, we believe our early traction in new product areas will drive increasing contributions next year from micro materials processing applications, telecom, entertainment and display products and our systems business. However, our visibility of a trough in the current downcycle is limited by the uncertainty surrounding the global macroeconomic trade and geopolitical environments." added Dr. Gapontsev.

GUIDANCE:

IPG Photonics sees Q4 2018 EPS of $1.30-$1.50, versus the consensus of $1.72. IPG Photonics sees Q4 2018 revenue of $300-330 million, versus the consensus of $351.73 million.

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