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3D Systems Affected By Surging Costs & Macroeconomic Woes
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3D Systems Corporation (DDD - Free Report) continues to struggle with the headwinds that have marred its performance over the past few quarters. We anticipate that a continuous rise in operating expenses, among other factors, will continue to hinder growth for the company. Moreover, in light of its miserable third-quarter 2017 results and uncertain operating environment, the company’s management withdrew full-year 2017 guidance.
It’s not surprising that the stock has also put up a dismal show in recent times. In the past three months, 3D Systems has lost 30.5% against the industry’s growth of 9%. Further, the Zacks Consensus Estimate for 2017 earnings has moved south over a couple of months from 44 cents to a loss of 4 cents. This indicates exceedingly bearish analyst sentiment, reflected by five downward estimate revisions versus none upward.
Read on to find the major factors curbing the Zacks Rank #5 (Strong Sell) company’s growth and why it may be prudent to avoid the stock at the moment.
Factors at Play
3D Systems had commenced significant transformational work in solving legacy issues in the third quarter, which partly led to the company withdrawing guidance for 2017. The company cited that it is unable to predict earnings and sales numbers accurately. This action has unnerved investors badly, as it indicates a highly uncertain environment.
During the third quarter, revenues from 3D printing products and services were significantly undermined due to continued challenging market conditions that adversely impacted customers' capital investment cycles and reduced demand across most geography. Further, its performance in Americas and Asia Pacific was very weak. If these problems persist, 3D Systems’ earnings will likely continue to be under pressure, going forward as well.
Also, the company continues to incur high research & development (R&D) and acquisition costs. Going forward, the company believes investment in IT and go-to-market initiatives will result in higher expenses, consequently restricting near-term operating income growth. During third quarter, the company had legal expenses from a Department of Commerce investigation, which inflated costs. We expect margin contraction and higher operating expenses in the upcoming quarters as 3D Systems attempts to implement organizational changes.
Moreover, over the past few quarters, the company has been experiencing unfavourablebroader market conditions that have badly hit its financial performance. Macroeconomic factors such as economic slowdown, inflation, currency fluctuations, commodity prices and credit availability have negatively impacted performance. This apart, the company’s business faces the adverse effects of rapid technological changes, alterations in user and customer requirements and preferences, consequently adding to challenges.
Thus, considering the risks that the company faces, we believe it would be prudent for investors to avoid the stock for now.
Axcelis Technologies has surpassed estimates thrice in the trailing four quarters, with an average positive earnings surprise of 25.2%.
Amphenol has surpassed estimates in the trailing four quarters, with an average positive earnings surprise of 8.9%.
A10 Networks has outpaced estimates in the preceding four quarters, with an average earnings surprise of 111.1%.
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With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
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3D Systems Affected By Surging Costs & Macroeconomic Woes
3D Systems Corporation (DDD - Free Report) continues to struggle with the headwinds that have marred its performance over the past few quarters. We anticipate that a continuous rise in operating expenses, among other factors, will continue to hinder growth for the company. Moreover, in light of its miserable third-quarter 2017 results and uncertain operating environment, the company’s management withdrew full-year 2017 guidance.
It’s not surprising that the stock has also put up a dismal show in recent times. In the past three months, 3D Systems has lost 30.5% against the industry’s growth of 9%. Further, the Zacks Consensus Estimate for 2017 earnings has moved south over a couple of months from 44 cents to a loss of 4 cents. This indicates exceedingly bearish analyst sentiment, reflected by five downward estimate revisions versus none upward.
Read on to find the major factors curbing the Zacks Rank #5 (Strong Sell) company’s growth and why it may be prudent to avoid the stock at the moment.
Factors at Play
3D Systems had commenced significant transformational work in solving legacy issues in the third quarter, which partly led to the company withdrawing guidance for 2017. The company cited that it is unable to predict earnings and sales numbers accurately. This action has unnerved investors badly, as it indicates a highly uncertain environment.
During the third quarter, revenues from 3D printing products and services were significantly undermined due to continued challenging market conditions that adversely impacted customers' capital investment cycles and reduced demand across most geography. Further, its performance in Americas and Asia Pacific was very weak. If these problems persist, 3D Systems’ earnings will likely continue to be under pressure, going forward as well.
Also, the company continues to incur high research & development (R&D) and acquisition costs. Going forward, the company believes investment in IT and go-to-market initiatives will result in higher expenses, consequently restricting near-term operating income growth. During third quarter, the company had legal expenses from a Department of Commerce investigation, which inflated costs. We expect margin contraction and higher operating expenses in the upcoming quarters as 3D Systems attempts to implement organizational changes.
Moreover, over the past few quarters, the company has been experiencing unfavourablebroader market conditions that have badly hit its financial performance. Macroeconomic factors such as economic slowdown, inflation, currency fluctuations, commodity prices and credit availability have negatively impacted performance. This apart, the company’s business faces the adverse effects of rapid technological changes, alterations in user and customer requirements and preferences, consequently adding to challenges.
Thus, considering the risks that the company faces, we believe it would be prudent for investors to avoid the stock for now.
Stocks to Consider
Some better-ranked stocks from the same space include Axcelis Technologies, Inc. (ACLS - Free Report) , Amphenol Corporation (APH - Free Report) and A10 Networks, Inc. (ATEN - Free Report) . While Axcelis Technologies sports a Zacks Rank #1 (Strong Buy), Amphenol and A10 Networks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Axcelis Technologies has surpassed estimates thrice in the trailing four quarters, with an average positive earnings surprise of 25.2%.
Amphenol has surpassed estimates in the trailing four quarters, with an average positive earnings surprise of 8.9%.
A10 Networks has outpaced estimates in the preceding four quarters, with an average earnings surprise of 111.1%.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
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