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Stratasys (SSYS) Q3 Earnings: What to Expect From the Stock?

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Stratasys Ltd. (SSYS - Free Report) is scheduled to report third-quarter 2017 results before the market opens on Nov 14. In the trailing four quarters, the company topped earnings estimates in three, delivering an average beat of 66.9%.

Before we discuss the factors likely to influence the forthcoming results, let’s take a look at how the company performed in the last quarter.

The company reported decent results in second-quarter 2017, wherein both earnings and revenues 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.

The Zacks Consensus Estimate for the third quarter is pegged at 4 cents compared to the in-line earnings reported in the year-ago quarter. The Zacks Consensus Estimate for sales of $162 million indicates around 3.2% growth from the prior-year quarter.

Let’s see how things are shaping up prior to this announcement.

Factors to Impact Q3 Results

Stratasys is a manufacturer of in-office rapid prototyping and manufacturing systems and 3D printers. We are positive about Stratasys’ turnaround strategies which include innovative product launches, strategic partnerships and acquisitions. These initiatives will help the company to better compete with its arch rival 3D Systems Corporation (DDD - Free Report) and gain more market share as the prospects of 3D printing industry appear bright.

However, we remain concerned about the company’s declining gross margin which has been impacted by the incremental sales generated from the lower-margin products of acquired businesses including MakerBot, Solid Concepts and Harvest Technologies. In the second quarter, the company’s non-GAAP gross margin contracted 290 basis points year over year. Therefore, Stratasys has to generate revenues from the sales of higher margin products to maintain its profitability in the to-be-reported quarter.

Further, some customers are delaying their purchases owing to the current economic conditions. Going forward, competition from peers is also a potent headwind.

Stratasys, Ltd. Price and EPS Surprise


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

What the Zacks Model Unveils?

Our proven model does not conclusively show that Stratasys is likely to beat earnings this quarter as it does not possess the key components. A stock needs to have both a positive Earnings ESPand a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here as you will see below:

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is -5.26%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Stratasys’ Zacks Rank #3 when combined with a negative ESP makes surprise prediction difficult.

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

Stocks With Favorable Combination

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

Meritor, Inc. (MTOR - Free Report) has an Earnings ESP of +4.26% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Cisco Systems, Inc. (CSCO - Free Report) has an Earnings ESP of +0.28% and a Zacks Rank #3.

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