3D Systems (DDD 1.44%) is slated to report its fourth-quarter and full-year 2016 earnings before the market opens on Tuesday, Feb. 28. The leading diversified 3D printing company will be the first of the two big players to report, as rival Stratasys has not yet reported.
This will be the third quarterly report released that covers a period for which Vyomesh Joshi has been CEO.
While 3D Systems' stock is still down considerably from its all-time high, it began climbing in early 2016. It's gained more than 64% for the one-year period through Feb. 24, versus Stratasys' 14.1% gain and the S&P 500's total return of nearly 26%. While 3D Systems' business is still struggling, there have been some improvements in the company's financials in 2016 compared with 2015, which is probably the main reason for the stock's more recent performance.
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Benchmark quarterly numbers
Here are the year-ago quarterly results to use as benchmarks.
|
Metric |
Q4 2015 Result |
|---|---|
|
Revenue |
$183.4 million |
|
Adjusted earnings per share (EPS) |
$0.19 |
Data source: 3D Systems.
Investors have no guidance from 3D Systems upon which to gauge its headline numbers. In an atypical move, the company didn't provide full-year guidance when it traditionally does -- early in the year when it releases full-year results for the prior year -- or later in the year either. This made some sense, given the company's reported poor visibility into the market environment coupled with the change in CEOs. (The former CEO abruptly exited in late October 2015, so 3D Systems was without a permanent CEO for five months.)
For the quarter, analysts expect 3D Systems to deliver adjusted EPS of $0.13 on revenue of $176.76 million, representing year-over-year declines of 31.6% and 3.6%, respectively. While long-term investors shouldn't give too much credence to Wall Street's near-term estimates, they can be helpful to know, since, together with forward guidance, they often help explain market reactions.
Along with the headline numbers, here's what to focus on in the report.
Sales of 3D printers
Like Stratasys, 3D Systems continues to struggle to grow 3D printer revenue, amid what's been a challenging market environment for two years. Stratasys' management has long attributed the widespread slowdown in demand among businesses for 3D printers to a glut of 3D printing capacity in the field because of the large number of machines sold in the years preceding the slowdown. Increased competition has also probably resulted in a lengthening of the sales cycle.
In the third quarter, 3D Systems' revenue generated from sales of 3D printers declined 6% year over year. Ideally, fourth-quarter results will show some improvement.
Progress on Figure 4
Hopefully, management will provide some color during the conference call following the earnings release on the company's progress in developing Figure 4. This is a speedy, robotic, modular, stereolithography 3D printing system designed for the production of plastic parts.
3D Systems introduced Figure 4 in early 2016 and demonstrated it at a major industry trade show in the fall. Joshi said on the last conference call that it was then roughly two years away from commercialization.
2017 guidance
It seems likely that 3D Systems will provide some type of guidance -- if not for the full year 2017, then at least for the first quarter. After all, we'll be two-thirds of the way through the first quarter when the company reports its 2016 results.
Final thoughts
Investors can hopefully expect continued solid performance from 3D Systems' golden child -- its healthcare business, whose sales rose 23.2% in the third quarter versus 3.2% for the overall business. However, the even better news would be an improvement in revenue generated from sales of 3D printers, as this is the company's core business. Moreover, 3D printer sales are central to 3D System' razor-and-blade business strategy, as they fuel sales of 3D printing material.
