A month has gone by since the last earnings report for Stratasys (SSYS - Free Report) . Shares have lost about 6.4% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Stratasys due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Stratasys Reports Q3 Results
Stratasys reported third-quarter 2018 earnings of 11 cents per share, which topped the Zacks Consensus Estimate of 6 cents. The figure was higher than the year-ago figure of 8 cents per share.
Stratasys’ revenues of $162 million missed the Zacks Consensus Estimate of $163 million. However, on a year-over-year basis, the figure increased 3.9%.
High-end product orders, utilization rates and parts services business continued to gain momentum, boosting revenues.
Revenues were also driven by strong growth in manufacturing orders from production of metal parts and major projects from top customers, especially aerospace.
Segment wise, Products revenues were 1.1% higher than the year-ago quarter to $109.6 million. This figure, however, was up 3.8% excluding divested businesses.
Within Products revenues, System revenues remained flat year over year, but taking divestiture into account, the figure grew 3.3%. Consumable revenues rallied 2.6% and 4.3% excluding divestiture, driven by strength in recurring revenues.
Revenues from Services increased 10.4% year over year to $52.4 million. The rise was primarily attributed to considerable growth in customer support revenues and significant improvement in performance at Stratasys Direct Manufacturing (SDM).
The SDM line benefited from its inclusion into the direct North America sales organization. The third quarter saw growing adoption of SDM for production and development among many large customers, who significantly increased their order size.
In the reported quarter, Stratasys focused on innovations across its FDM and PolyJet technologies, which are expected to expand the company’s total addressable market in advanced manufacturing, going forward.
Further, in September, Stratasys’ partner, Siemens Mobility inaugurated its first digital rail maintenance center in Germany, which will use Stratasys’ advanced FDM 3D printers to run the service operations.
Also, management was encouraged with the significant benefits reaped by GKN Aerospace with the adoption of Stratasys F900 Production 3D Printer.
Stratasys also expanded its association with motorsports company Team Penske over additive manufacturing.
Stratasys’ non-GAAP gross profit increased 3.3% from the year-ago period to $84.5 million. However, non-GAAP gross margin fell 40 basis points (bps) to 52.1% due to product mix.
Non-GAAP operating income totaled $8.2 million, up 1.2% from the year-ago quarter. Operating margin declined 10 bps to 5.1%.
Increased investment in research and development initiatives including those in expansion of core FDM and PolyJet technologies, metal additive manufacturing, advanced composite material and software and application development weighed on the margin.
Balance Sheet and Cash Flow
The company exited the quarter with cash and cash equivalents of $348.9 million compared with $346.7 million at the end of the previous quarter.
As of Sep 30, 2018, long-term debt came in at $23.3 million.
Net cash provided by operating activities in the quarter was $5 million.
For full-year 2018, the company lowered the revenue guidance in the range of $670-$680 million compared with $670-$700 million projected earlier.
Stratasys, however, raised the non-GAAP earnings per share guidance to 50-55 cents compared with the earlier projected range of 30-50 cents.
The company reiterated the guidance for non-GAAP operating margin, which is expected to be in the 4.5-6% band.
The company expects lower CapEx for the full year. Capital expenditures are now estimated to lie within $25-$35 million compared with the previously projected range of $30-$40 million.
How Have Estimates Been Moving Since Then?
Fresh estimates followed an upward path over the past two months. The consensus estimate has shifted 69.23% due to these changes.
Currently, Stratasys has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Charting a somewhat similar path, 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.
Stratasys has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.