It has been about a month since the last earnings report for 3D Systems . Shares have added about 6.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is 3D Systems due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
3D Systems reported non-GAAP earnings of 6 cents per share for second-quarter 2018 compared with 8 cents in the year-ago quarter. The Zacks Consensus Estimate was pegged at breakeven.
This 3D printer maker reported revenues of $176.6 million in the quarter, reflecting a year-over-year increase of 10.7%. Steady demand for the company’s healthcare, materials, software and on-demand manufacturing, along with increased printer unit sales proved conducive for the top line. Moreover, revenues beat the Zacks Consensus Estimate of $166 million.
Management notes that growth in the company’s legacy products, its go-to-market strategy and improvement in customer engagement were the key growth drivers.
The potential launch of products in second half of 2019 makes management optimistic.
3D Systems’ Healthcare revenues were up 26% to $61.4 million year over year, driven by growth across all categories. Notably, the company’s on-demand manufacturing revenues were up 6% to $27.4 million, helped by its investments in facilities, customer experience and technology.
Software revenues remained flat year over year at $24.1 million. Material revenues increased 3% to $45 million. Printer revenues increased 41% and came in at $39.2 million. Meanwhile, printer unit sales surged 37% on increase in both production and professional unit sales.
Geographically, the company witnessed 6% growth in Americas and Europe and 38% in Asia Pacific. The change in management in Japan was accretive to growth.
In the reported quarter, non-GAAP gross margin contracted 170 basis points on a year-over-year basis to 48.9%. The decline was mainly due to unfavorable sales mix and increased investment in services, and on-demand manufacturing, which more than offset the cost-reduction benefits achieved from ongoing supply-chain initiatives.
In the reported quarter, the company’s non-GAAP operating expenses rose 12% to $79 million, as SG&A (up 22%) expenses rose significantly, driven by the company’s persistent investment in go-to-market, IT transformation, higher compensation cost and legal expense. Non-GAAP R&D expense declined 8% in the quarter.
Cash Flow and Balance Sheet
3D Systems ended the second quarter with cash and cash equivalents of $119.3 million, down from $126.1 million as of the previous quarter. During the quarter, the company generated $10.7 million of cash from operational activities.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 33.33% due to these changes.
At this time, 3D Systems has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise 3D Systems has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.