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Stratasys (SSYS) Q3 Earnings Top, Revenues Miss, '17 View Up

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Stratasys Ltd. (SSYS - Free Report) reported mixed results for third-quarter 2017, wherein the bottom line surpassed the Zacks Consensus Estimate but the top line missed the same. Furthermore, although revenues witnessed a marginal fall, earnings improved significantly on a year-over-year basis.

For the third quarter, the company reported non-GAAP earnings per share of 8 cents, which surpassed the consensus mark of 4 cents.

The year-over-year improvement in the bottom line was mainly driven by the company’s consistent focus on reducing operating expenses, partially offset by lower revenues.

Shares of Stratasys rallied 4% yesterday, following the third-quarter results. Also, the company upped its full-year 2017 guidance, which positively impacted the share price.

Notably, the stock has outperformed the industry to which it belongs to year to date. The stock yielded a return of 26.8% over the period, outperforming the industry’s gain of 12%.

Quarter Details

Stratasys’ revenues of $155.9 million missed the Zacks Consensus Estimate of $162 million. Also, on a year-over-year basis, the figure dipped 0.8% mainly due to a fall in Product revenues.

Segment wise, Product revenues were down 2% from the year-ago quarter to $108.4 million mainly due to a 6% decline in System sales, which was affected by a shift in product mix toward the lower-end system. Also, severe weather conditions in North America during September negatively impacted segmental revenues.

Revenues from Services, however, were up 1% year over year to $47.5 million. The increase was primarily due to 5% growth in customer support revenues driven primarily by growth in the installed base of systems.

Stratasys’ non-GAAP gross margin contracted 150 basis points (bps) to 52.5%, primarily due to the shift in product mix and lower revenue base.

The company’s non-GAAP operating expenses decreased 10% year over year to $73.8 million, primarily due to the company’s continuous focus on improving operating efficiencies. Also, as a percentage of revenues, non-GAAP operating expenses went down year over year from 51.9% to 47.3%. 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 $8.1 million in the reported quarter compared with $3.3 million in the year-ago quarter. Operating margins came in at 5.2% compared with 2.1% reported in the year-ago quarter.

The company exited the quarter with cash and cash equivalents of $302.8 million compared with $305.3 million at the end of the previous quarter. Inventories came in at approximately $124.1 million compared with $116.5 million in the previous quarter. Long-term debt as of Sep 30, 2017, came in at $19.5 million.


Stratasys updated its full-year 2017 outlook. The company now expects revenues in the range of $655-$670 million, up from the previous guidance of $645-$680 million. The Zacks Consensus Estimate is pegged at $670.6 million. Non-GAAP earnings per share are now projected between 40 cents and 48 cents, up from the previous guidance of 19 cents and 37 cents. The Zacks Consensus Estimate is pegged at 36 cents.

Furthermore, the company now anticipates non-GAAP operating margin to be in the range of 5-6% (previous guidance 3-5%). Capital expenditure is now estimated in the range of $20-$30 million, down from the previous guidance range of $40-$50 million.

Bottom Line

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.

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

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

Some better-ranked stocks in the broader technology sector are NVIDIA Corporation (NVDA - Free Report) and Micron Technology, Inc. (MU - Free Report) , both 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 NVIDIA and Micron are 11.2% and 10%, respectively.

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