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What's in the Cards for 3D Systems (DDD) in Q4 Earnings?

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3D Systems Corporation (DDD - Free Report) is slated to report fourth-quarter 2016 results,before the opening bell on Feb 28.

3D Systems has an extremely volatile earnings history, oscillating between incredible beats and abysmal misses. Over the trailing four quarters, the company has posted three huge beats and missed estimates drastically once. Last quarter, it had posted an incredible beat of 900%.

Let's see how things are shaping up for this announcement.

Factors to Consider

3D Systems’ broad portfolio of healthcare offerings is likely to continue its momentum and we expect it to be one of the strongest profit churners in the upcoming quarterly results. During third-quarter 2016, revenue from healthcare and related applications jumped an impressive 23% year over year, driven by solid demand for the company’s extensive offerings, as well as expansion by clients printing medical and dental devices.

Particularly, precision healthcare offerings like printers and materials, surgical simulation and planning, and printing of devices and tools contributed to growth. This apart, the company’s other four growth channels, namely expansion of quickparts services, accelerating 3D printer penetration through channel expansion, launch of integrated 3D authoring solutions platform and strengthening of partnerships are likely to drive growth for the soon-to-be-reported quarter.

Its recent partnership with PTC, where the two leaders joined forces to integrate 3D Systems’ 3D Sprint SDK into PTC’s flagship Creo CAD platform, should also have a positive impact on results.

During the quarter to be reported, 3D Systems rolled out 3D Sprint 2.0, a productivity-enhancing print management and print optimization software, developed for 3D Systems’ plastic 3D printers. In addition, the company’s operational restructuring initiatives, such as improving the sales network as well as undertaking lean manufacturing initiatives in supply-chain operations are likely to supplement results. We believe that these steps will significantly reduce 3D Systems’ cost of sales and operating expenses, thereby driving profits.

Over the past one year, 3D Systems’ shares recorded an average return of 66.5%, outperforming the Zacks classified Computer Mini-Market industry's average of 41% over the same time period.

However, for the past few quarters, the company has been witnessing particularly unfavorable broader market conditions that have hit its financial performance severely. It has been grappling with macroeconomic headwinds, including economic slowdown, inflation, currency fluctuations, commodity prices and credit availability. Further, sustained softness in prototyping, stiff competition and general macro headwinds which are affecting the sector, will likely also hurt 3D Systems’ results.

In the previous quarter, revenues from 3D printing products and services were significantly undermined due to prolonged challenging market conditions that hampered customers' capital investment cycles and reduced demand across all geographies.

Also, cut-throat competition in the industry, along with factors like escalating research & development and selling & administrative expenses, are likely to impair the financials to some extent. However, the company’s restructuring initiatives might curtail costs and provide a much needed boost to profits.

3D Systems Corporation Price, Consensus and EPS Surprise

Earnings Whispers

Our proven model does not conclusively indicate an earnings beat for 3D Systems this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. But that is not the case here as you will see below.

Zacks ESP: Earnings ESP for the company is currently pegged at 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 4 cents.You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: 3D Systems’ Zacks Rank #3 increases the predictive power of ESP. However, we need to have a positive ESP as well to be confident about an earnings beat.

Note that we caution against stocks with Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks That Warrant a Look

Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat in their upcoming results:

Burlington Stores, Inc. (BURL - Free Report) has a positive Earnings ESP of +1.18% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

AECOM (ACM - Free Report) has an Earnings ESP of +1.41% and a Zacks Rank #3.

Headwaters Incorporated has an Earnings ESP of +13.33% and a Zacks Rank #3.

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