Can Stratasys Crush 3D Systems and ExOne?

Stratasys (NASDAQ: SSYS  ) will release its quarterly report on Thursday, and investors have bid the stock to all-time highs in hopes of the 3-D printing company's continued growth. Yet with 3D Systems (NYSE: DDD  ) having recently cut its profit forecast for the full year, Stratasys investors could fall prey to the same overblown expectations that could jeopardize the company's share price going forward, especially as newer entrants ExOne (NASDAQ: XONE  ) and voxeljet start making their presence known in the industry.

Early in the 3-D printing sector's history, Stratasys and 3D Systems essentially carved up the industry between them. Stratasys focused on large industrial-scale printing, while 3D Systems sought a stranglehold over the consumer and smaller-scale side of the business. But with Stratasys' purchase of MakerBot and the arrival of ExOne and voxeljet on the scene, those traditional lines have blurred and even disappeared, leading to an all-out battle for supremacy in the space. Let's take an early look at what's been happening with Stratasys over the past quarter and what we're likely to see in its report.

Stats on Stratasys

Analyst EPS Estimate

$0.42

Change From Year-Ago EPS

5%

Revenue Estimate

$117.13 million

Change From Year-Ago Revenue

136%

Earnings Beats in Past Four Quarters

4

Source: Yahoo! Finance.

Is Stratasys earnings growth slowing down?
Analysts in recent months have cut back on their views of Stratasys earnings, reducing their third-quarter estimates by $0.06 per share and cutting about 5% from full-year 2013 and 2014 projections. The stock hasn't paused in its upward trajectory, though, climbing more than 30% since early August.

Stratasys started the quarter with positive news, with its second-quarter earnings report showing that sales more than doubled on a 41% rise in adjusted earnings per share. The company also boosted its full-year revenue guidance, showing how much growth is left in the 3-D printing space. Yet some pointed out that the acquisition of MakerBot, which put Stratasys in more direct competition with 3D Systems, was responsible for much of the increase in guidance.

3D Systems remains an important competitor, and the growth of its Cube consumer printer could bode well for Stratasys and its MakerBot line. Yet new entrants to the space might pose even larger long-term threats. Hewlett-Packard CEO Meg Whitman said the company would move into the 3D-printing market by the middle of next year, bringing its deep pockets into an area that has featured mostly much smaller companies. The recent IPO of voxeljet, meanwhile, adds a further threat on the industrial and commercial side of the business as it tries to join ExOne in serving the more demanding needs of certain industrial producers.

Investors also must remember that Stratasys and its peers will need a lot of capital to make good on their growth potential, and sometimes that could lead to actions that hurt share prices, at least in the short run. In September, Stratasys made a secondary offering of about 5.2 million shares at $93, with the stock having dropped from above $110 before the company announced the offering. ExOne suffered the same fate with its 2.6 million-share offering, showing that Stratasys isn't the only company raising capital to fight harder for dominance in the industry.

One key to Stratasys' success will be finding the best ways to make its printers available to the public. A partnership to provide printers in UPS stores will drive casual use among many customers who wouldn't buy printers of their own and also give potential buyers firsthand experience using the printers. The social awareness of that strategy could give Stratasys an edge over 3D Systems on the consumer side.

In the Stratasys earnings report, be sure to compare its growth with the numbers 3D Systems recently reported. Among the two first-movers, Stratasys will want to ensure it can keep up with or surpass 3D Systems even as it holds newer rivals at bay.

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