Piper Jaffray Reiterates Its Overweight Rating On IPG Photonics Following Earnings Report

Piper Jaffray believe IPG Photonics' IPGP secular growth story remains in its early chapters as both the sustained recovery for global material processing applications, and progress in fiber penetration driven by IPG's technological and economic advantages appear well ahead of schedule. Incremental operating margins in 4Q reached 73%, a rare level of operating leverage in any industry and certainly in industrials as mgmt continues to drive utilization up and control costs. Sales in Asia and Europe continue to set the pace, with Asia up 105% in 4Q driven mainly by China where sales for the year finished up ~176%. Japan cutting OEM's have joined China in transitioning from gas to fiber lasers for cutting applications as that country appears to be poised for a greater contribution to CY11 growth. IPG continues to deliver exceptional oper. leverage, as 4Q10 incremental operating margins reached ~73% and ~63% for CY10. Piper believes management continues to successfully push utilization of existing capacity while making deliberate and astute global capacity investments. Piper Jaffray raises its PT from $66 to $70 and has an Overweight rating on IPGP IPGP is trading lower at $56.65