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Why Is 3D Systems (DDD) Down 4.8% Since Last Earnings Report?

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It has been about a month since the last earnings report for 3D Systems (DDD - Free Report) . Shares have lost about 4.8% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is 3D Systems due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

3D Systems Earnings & Revenues Beat Estimates in Q2

3D Systems reported strong second-quarter 2021 results, wherein both earnings and revenues not only surpassed the respective Zacks Consensus Estimate but also improved significantly year over year.

The company reported non-GAAP earnings of 12 cents per share beating the consensus mark of 5 cents per share. The bottom line compared favorably with the year-ago quarter’s loss of 13 cents per share. Strong bottom-line performance was mainly driven by higher revenues and cost savings achieved from restructuring initiatives.

In the second quarter of 2021, the company reported revenues of $162.6 million, up 44.1% from the year-ago quarter and 11.3% from the previous quarter. Excluding the impact of business divestments in 2020 and 2021, revenues surged 59.3% year on year.

The top line outpaced the consensus mark of $141.9 million. The year-over-year increase in top-line results reflected acceleration beyond pre-pandemic performance levels.

Continued strength in the Healthcare segment and increased demand from Industrial customers were the key drivers of 3D Systems’ second-quarter performance.

Product revenues, representing 66.8% of the total revenues, were $108.6 million, were up a whopping 74.6% year over year. Meanwhile, revenues from services accounted for 33.2% of revenues. The figure improved 6.5% year over year.

Quarterly Details

In the second quarter, revenues from the Healthcare segment increased 68.6% year over year to $82.8 million, and surged 14.2% compared with the previous quarter. Double-digit growth in medical applications and strong demand for dental materials aided this growth.

The industrial division revenues increased 25.3% year over year and 8.3% sequentially to $79.7 million. Excluding the impact of business divestments in 2020 and 2021, the unit’s revenues increased 49.6%. The company witnessed solid demand for products as well as materials.

Operating Details

During the second quarter of 2021, 3D Systems’ non-GAAP gross profit surged 49% year over year to $69 million. Non-GAAP gross profit margin expanded 140 basis points (bps) to 42.4%. However, gross margin contracted 140 bps quarter over quarter due to non-recurring write-downs related to equipment and inventory.

Non-GAAP operating expenses were $55.2 million, down 3.3% from the year-earlier quarter. This decline in non-GAAP operating expenses resulted from savings achieved from cost restructuring activities, offset by spending in targeted areas for future growth.

Balance Sheet Details

The global leader in additive manufacturing solutions closed the second quarter with cash and cash equivalents of $131.8 million, down from the prior quarter’s $133 million. As of Jun 30, 2021, the company held no debt, indicating a strong balance sheet for strategic investments.

3D Systems had an unused revolving credit facility worth $100 million, with full availability at present. It generated $42.0 million of cash from operating activities during the first half of 2021.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 12.5% due to these changes.

VGM Scores

At this time, 3D Systems has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions has been net zero. Notably, 3D Systems has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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