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Stratasys (SSYS) Falls on Q3 Loss, Revenues Lag; Cuts View

STX SSYS NVDA DDD

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Shares of Stratasys Ltd. (SSYS - Free Report) went down more than 12% yesterday after the company reported not-so-encouraging third-quarter 2016 results and lowered its full-year 2016 revenue and earnings guidance. Also, revenues and loss reported during the quarter compared unfavourably on a year-over-year basis, which in turn impacted the share price.

The company reported adjusted loss per share (excluding amortization, impairment and other one-time items but including stock-based compensation) of 8 cents compared with the Zacks Consensus Estimate of a loss of 12 cents per share. The company’s quarterly loss however widened from the year-ago quarter.

Quarter Details

Stratasys’ revenues not only declined 6.2% year over year to $157.2 million, but also missed the Zacks Consensus Estimate of $174 million. Product revenues were down 7.1% from the year-ago quarter to $110.1 million. Also, revenues from Services decreased 4.1% year over year to $47.1 million. The company’s soft revenues reflect weak performance at its MakerBot business.

Stratasys stated that revenues from the MakerBot business decreased 29% on a year-over-year basis. The decline was primarily due to softness in overall market conditions and unfavourable timing of new product introductions.

Stratasys’ adjusted gross margin (excluding amortization and other one-time expenses but including share-based compensation) expanded 590 basis points (bps) to 53.6%, primarily due to favourable product mix and lower cost of sales.

The company’s adjusted operating expenses decreased 13.6% year over year to $84.7 million, primarily due to a lower cost structure. Also, as a percentage of revenues, operating expenses decreased year over year from 59.2% to 54.6%. The decrease was primarily due to lower research and development expenses and selling, general and administrative expenses.

The company posted adjusted operating loss of $1.5 million in the reported quarter compared with adjusted operating loss of $14.8 million reported in the year-ago quarter.

The company exited the quarter with cash and cash equivalents and short-term bank deposits of $239.3 million compared with $253.9 million in the previous quarter. Inventories came in at approximately $127 million compared with $125.7 million in the second quarter. The company does not have any long-term debt.

Guidance

Stratasys lowered its full-year 2016 revenue and earnings guidance. The company now expects revenues in a range of $662 million to $673 million (previously $700 million to $730 million). The Zacks Consensus Estimate is pegged at $686 million. Non-GAAP income per share is now projected between 13 cents and 21 cents (previously 17 cents and 43 cents).

For full-year 2016, the company continues to expect gross margin to be in a range of 54% to 55%. Operating margin is expected to be in a range of 3% to 5%. Capital expenditure is expected to be in a range of $50 million to $60 million.

STRATASYS LTD Price, Consensus and EPS Surprise

Conclusion

Stratasys reported dismal third-quarter results. It posted a loss and revenues missed the Zacks Consensus Estimate. Also, year-over-year revenue comparisons were unfavourable. The company’s quarterly results were negatively impacted by difficult market conditions and lower-than-expected performance at its MakerBot business. Also, the company lowered its outlook for 2016.

Also, some customers are delaying their purchases owing to the current economic conditions. In the 3D printer business, the majority of customers have moved toward the lower-priced uPrint, which may affect the company’s margins in the upcoming quarters. Going forward, competition from 3D Systems Corporation (DDD - Free Report) is also a potent headwind.

Stratasys carries a Zacks Rank #2 (Buy).

A couple of better-ranked stocks in the technology sector are NVIDIA Corporation (NVDA - Free Report) and Seagate Technology plc (STX - Free Report) , both of which sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here

NVIDIA and Seagate have long-term expected earnings per share growth rates of 10.3% and 4.05%, respectively.

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