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Stratasys Ltd. (SSYS - Free Report) reported decent results for second-quarter 2017, wherein the top and bottom lines, both, surpassed the Zacks Consensus Estimate. Furthermore, although the top line witnessed a marginal fall, the bottom line improved significantly on a year-over-year basis.

For the second quarter, the company reported adjusted earnings per share (excluding amortization, impairment and other one-time items but including stock-based compensation) of 8 cents, which came much above the estimate of a penny. Moreover, it marked tremendous eight-fold jump from a penny reported in the year-ago quarter.

On a GAAP basis, the company reported loss of 11 cents per share compared with a loss of 36 cents per share witnessed in the year-ago quarter. On non-GAAP basis too, the company marked significant year-over-year improvement with earnings per share increasing to 17 cents from 12 cents posted in second-quarter 2016. The year-over-year improvement in bottom-line results came mainly due to the company’s consistent focus on reducing operating expenses, which were partially offset by lower revenues.

Shares of Stratasys were seen volatile following the earnings release, moving up to $22.29 and down to $21.67, before settling at $22.14. Notably, the stock has outperformed the industry to which it belongs to in the year-to-date period. The stock yielded a return of 34.8% over the period, outperforming the industry’s return of 11.8%.

Quarter Details

Stratasys reported revenues of $170 million came ahead of the Zacks Consensus Estimate of $167 million. However, on a year-over-year basis, the figure edged down 1.2% mainly due to the fall in Product revenues.

Segment wise, Product revenues were down 2.2% from the year-ago quarter to $121 million mainly due to a 6% decline in System sales, which was affected by a shift in product mix toward the lower-end system. Revenues from Services, however, were up 1.4% year over year to $49 million.

Stratasys’ non-GAAP gross margin contracted 290 basis points (bps) to 53%, primarily due to the shift in sales mix.

The company’s non-GAAP operating expenses decreased 8.1% year over year to $79 million, primarily due to the company’s continuous focus on improving efficiencies. Also, as a percentage of revenues, non-GAAP operating expenses went down year over year from 50% to 46.5%. The decrease was primarily due to lower research and development expenses, and selling, general and administrative expenses.

The company posted non-GAAP operating income of $11.1 million in the reported quarter compared with $10.2 million reported in the year-ago quarter.

Stratasys, Ltd. Price, Consensus and EPS Surprise

 

Stratasys, Ltd. Price, Consensus and EPS Surprise | Stratasys, Ltd. Quote

The company exited the quarter with cash and cash equivalents, and short-term bank deposits of $305.3 million, up from $297.2 million at the end of the previous quarter. Inventories came in at approximately $116.5 million compared with $116 million in the previous quarter. Long-term debt as of Jun 30, 2017, came in at $20.4 million.

Guidance

Stratasys reiterated its full-year 2017 outlook. The company still expects revenues in the range of $645–$680 million (mid-point $662.5 million). The Zacks Consensus Estimate is pegged at $668.8 million. Non-GAAP earnings per share are projected between 19 cents and 37 cents.

Furthermore, the company still anticipates non-GAAP operating margin to be in the range of 3–5%. Capital expenditure is estimated in the range of $40–$50 million, in line with the previous guidance range.

Bottom Line

Stratasys reported modest second-quarter results, wherein the top and bottom lines both came ahead of the respective Zacks Consensus Estimate. The bottom-line results, which displayed year-over-year improvement, were also encouraging.

It seems that Stratasys’ turnaround strategies, which include launching innovative products, strategic partnerships and acquisitions, and improving cost efficiencies, are paying off. These initiatives will help Stratasys to gain more market share as prospects of the 3D printing industry appears bright.

Currently, Stratasys carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector are Applied Optoelectronics (AAOI - Free Report) , Lam Research Corporation (LRCX - Free Report) and FormFactor Inc. (FORM - Free Report) , all sporting Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term expected EPS growth rates for Applied Optoelectronics, Lam Research and FormFactor are 18.8%, 17.2% and 16%, respectively.

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