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Shares of 3D Systems Corp. (DDD - Snapshot Report) crashed by more than 15% yesterday after the company announced its preliminary earnings results for full-year 2013. The company currently expects non-GAAP earnings of 83 cents–87 cents per share, down from its previously guided range of 93 cents–$1.03 per share.

Management also narrowed its revenue guidance to $513 million–$514 million from its previously mentioned range of $500 million to $530 million. The company witnessed a surge in new order wins and order backlogs are expected to have almost a two-fold increase on a sequential basis in the quarter.

Although revenues are expected at nearly the mid-point of its previously guided range, the news failed to cheer up the investors as management had drastically lowered the earnings outlook for the year.

The primary reason cited for lowered earnings guidance was a significant increase in research and development (R&D) expenditures along with a surge in sales and marketing expenses. In Dec 2013, the company had made a couple of strategic acquisitions, namely the 3D filament manufacturer Village Plastics Co. for an undisclosed sum, and a division of Xerox Corporation (XRX - Analyst Report) for $32.5 million.

The integration costs of these acquisitions are also expected to be a drag on the earnings guidance. Moreover, results are also likely to be marred by the unfavorable product mix and sluggish on-demand parts business of the company in this quarter.

3D Systems is aggressively pursuing R&D to maintain its premier place in the 3D printing industry. The industry is highly dependent on patented technologies which play an important role in determining a company’s performance. This Zacks Rank #3 (Hold) stock is likely to face severe competition as some of its primary patents are about to expire in 2014.

3D printing is a relatively new concept and is likely to take time to gain popularity. In 2013, Stratasys Ltd. (SSYS - Analyst Report), 3D Systems and ExOne Company (XONE - Snapshot Report) generated returns of 45.4%, 115.1% and 114.4%, respectively. However all three are on a downhill so far in 2014, with a decline of 17.4%, 32.0% and 36.5%, year-to-date. Another recently-listed 3D printing company, Voxeljet (VJET - Snapshot Report), is also down 26.4% year-to-date.

The industry has been facing some tough times since January owing to guidance cuts by some companies. Last month ExOne lowered its fiscal 2013 revenue guidance and Stratasys slashed its 2014 guidance fearing higher operating expenses from incremental investments in sales and marketing as well as R&D.

However, 3D Systems intends to continue investing in R&D for a sustainable long-term growth. The company expects that its portfolio of new and innovative products will lead to more than 30% organic growth in the next couple of years, thereby enhancing its margins and earnings, going forward.

The 3D printing market also presents a favorable long-term opportunity as a large number of engineers, designers, architects and entrepreneurs are opting for 3D solutions for their primary designing and product modeling. Only time will tell whether such investments will indeed bear fruit for 3D Systems.

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