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Stratasys' (SSYS) Q4 Earnings, Revenues Beat; View Weak

WDC STX SSYS DDD

Trades from $3

Shares of Stratasys Ltd. (SSYS - Free Report) declined more than 9% yesterday after the company provided tepid full-year 2016 revenue guidance.

The stock also yielded a negative return of approximately 24.93% over the past one year, underperforming the Zacks categorized Computer-Peripheral Equipment industry return of 26.25%.

The company reported adjusted income per share (excluding amortization, impairment and other one-time items but including stock-based compensation) of 9 cents. The Zacks Consensus Estimate was of a loss of 6 cents per share. In the year-ago quarter, the company had incurred a loss of 19 cents.

On a GAAP basis, the company reported loss of 30 cents per share compared with a loss of $4.46 per share reported in the year-ago quarter.

Quarter Details

Stratasys’ revenues not only increased 1.1% year over year to $175.3 million, but also surpassed the Zacks Consensus Estimate of $170 million. Product revenues were up 2% from the year-ago quarter to $127 million. Revenues from Services were almost flat year over year to $49 million. The company’s timing of new product introductions and improved organizational changes at MakerBot benefitted the quarter’s revenues.

Stratasys’ adjusted gross margin (excluding amortization and other one-time expenses but including share-based compensation) expanded 580 basis points (bps) to 53.3%, primarily due to favourable product mix, lower cost of sales and higher revenues.

The company’s adjusted operating expenses decreased 13.1% year over year to $86.6 million, primarily due to a lower cost structure. Also, as a percentage of revenues, operating expenses decreased year over year from 57.5% to 49.4%. The decrease was primarily due to lower research and development expenses and selling, general and administrative expenses.

The company posted adjusted operating income of $6.7 million in the reported quarter compared with adjusted operating loss of $17.3 million reported in the year-ago quarter.

The company exited the quarter with cash and cash equivalents and short-term bank deposits of $280.3 million compared with $239.3 million in the previous quarter. Inventories came in at approximately $117.5 million compared with $127 million in the second quarter. Long-term debt during the quarter amounted to $22.3 million.

The company generated $26 million cash flow from operations during the quarter.

Guidance

Stratasys provided its full-year 2017 revenues and earnings guidance. The company expects revenues in the range of $645 million–$680 million. The Zacks Consensus Estimate is pegged at $691 million. Non-GAAP income per share is projected between 19 cents and 37 cents.

For full-year 2017, the company expect non-GAAP Operating margin to be in the range of 3–5%. Capital expenditure is expected to be in the range of $40 million–$50 million.

Conclusion

Stratasys reported encouraging fourth-quarter results. Both its top and bottom line surpassed the Zacks Consensus Estimate. Also, year-over-year revenue comparisons were favourable. The company’s quarterly results were positively impacted by new product introductions and improved organizational changes at MakerBot business. However, the company provided a tepid outlook for 2017.

Also, some customers are delaying their purchases owing to the current economic conditions. In the 3D printer business, majority of customers have moved toward the lower-priced uPrint, which might 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 #3 (Hold).

A couple of better-ranked stocks in the technology sector are Western Digital Corp. (WDC - 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

Western Digitaland Seagate have long-term expected earnings per share growth rates of 12.11% and 8.17%, respectively.

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