A month has gone by since the last earnings report for 3D Systems (DDD - Free Report) . Shares have lost about 1.1% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is 3D Systems 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.
3D Systems' Reports Weak Q1 Earnings
3D Systems incurred non-GAAP loss of 9 cents per share in first-quarter 2019, wider than the loss of 3 cents in the year-ago quarter and also the Zacks Consensus Estimate of a loss of a penny.
This 3D printer maker’s revenues logged $152 million in the quarter under review, reflecting a year-over-year decline of 8%. Moreover, the top line missed the Zacks Consensus Estimate of $166 million.
The company experienced weaker sales in on-demand manufacturing through the quarter due to business adjustments related to export compliance and outsourcing.
Further, lower demand from the automotive industry in Europe was an overhang on the quarterly results. Moreover, halt in shipments of metal printers due to a technical glitch impacted revenues by nearly $8 million.
The company anticipates timing of the large orders from Align to remain a key challenge throughout the year. However, it expects printers, materials, healthcare and software to boost long-term growth.
3D Systems’ Healthcare revenues decreased 5% year over year to $50 million. Increase in Healthcare services as well as simulation revenues was offset by the impact of the timing of order from Align Technology. Significant shipments to Align in the year-ago quarter in order to support its capacity expansion in China led to the tough year-over-year comparison.
Excluding the order, healthcare revenues grew nearly 18%. Management remains optimistic about overall demand trends for healthcare including the company’s NextDent 5100 3D printer.
The company’s on-demand manufacturing revenues were down 12% to $22.6 million. Headwinds related to export compliance and outsourcing changes are dampeners. Softness in demand from automotive customers in Europe was also a downside.
Printer unit sales soared 90% but Printer revenues dropped 29% to $28 million due to the mix of unit selling prices. The company anticipates printer unit sales, revenue mix and the overall average selling price to continue fluctuating as the company ramps up sales with new products at prices ranging from $5,000 to more than $1 million.
Software revenues fell 8% year over year to $20.8 million due to lower Cimatron product revenues. Material revenues dipped 3% to $41.4 million due to a faster-than-expected deterioration in legacy materials. The company expects revival of materials growth during the second half of 2019.
Product revenue (including printers, software, and other products) declined 19%, to $51
million, accounting for 34% of total revenue
In the reported quarter, non-GAAP gross margin contracted 290 basis points on a year-over-year basis to 44.2%.
In the quarter under consideration, the company’s non-GAAP operating expenses improved 8% to $72.9 million. Non-GAAP SG&A was down 5% and non-GAAP R&D expense was lower 15% in the quarter under consideration.
Cash Flow and Balance Sheet
3D Systems ended the first quarter with cash and cash equivalents of nearly $157.3 million compared with $110 million in the sequential quarter.
The company used $15.2 million of cash in operational activities during the first quarter as compared to $7.7 million of cash generated sequentially.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -184.62% due to these changes.
Currently, 3D Systems has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise 3D Systems has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.