3D Systems Corporation Earnings: What to Expect Friday

3D Systems (NYSE: DDD  ) will release its quarterly report on Friday, and investors continue to have high expectations for growth from the 3-D printing pioneer. Yet for 3D Systems and rivals Stratasys (NASDAQ: SSYS  ) and ExOne (NASDAQ: XONE  ) , the past two months have been a rough time for shareholders, who've had to endure a substantial correction as the companies have been far less optimistic about their prospects to continue their growth trajectory through 2014.

3D Systems has captured the imagination of investors looking to get in on the ground floor of what could become a transformative technology for manufacturing around the world. With applications for 3-D printing both in the consumer and industrial world, small companies like 3D Systems, Stratasys, ExOne, and voxeljet (NYSE: VJET  ) are competing against much larger players who are only now starting to get interested in the potential that additive manufacturing has. Will 3D Systems emerge the winner in the increasingly crowded space? Let's take an early look at what's been happening with 3D Systems over the past quarter and what we're likely to see in its report.


Source: 3D Systems.

Stats on 3D Systems

Analyst EPS Estimate

$0.20

Change From Year-Ago EPS

(23%)

Revenue Estimate

$154.91 million

Change From Year-Ago Revenue

53%

Earnings Beats in Past Four Quarters

0

Source: Yahoo! Finance.

Can 3D Systems keep growing faster?
In recent months, analysts have cut back on their views on 3D Systems earnings, reducing their fourth-quarter estimates by a third and slashing almost $0.50 per share from their full-year 2014 projections. The stock has climbed 9% since mid-November but fallen more than 20% from its January highs.

We've already gotten a sense of what 3D Systems' fourth-quarter report will look like, as the company released preliminary results earlier this month. The company lowered its expected adjusted earnings range for 2013 by $0.10 to $0.16 per share, but what really hit the stock hard was its range for 2014 guidance that was between $0.42 and $0.54 per share below what investors were expecting. That news sent shares of 3D Systems to lose more than a quarter of their value at one point following the release before recovering some ground later in the day, and it caused collateral damage throughout the 3-D printing space, with Stratasys, voxeljet, and ExOne all falling more than 10% intraday before regaining ground.

But the real question investors should ask themselves is whether 3D Systems is sacrificing its earnings in 2014 in an effort to bolster its long-term prospects. The company has said that it wants to accelerate investments in research and development in order to compete more effectively against its rivals, and that should help the company in its goals to reach a 30% organic growth rate while still continuing to target strategically appropriate acquisitions where available. 3D Systems' recent acquisition of a portion of Xerox's 3-D printing-related business is a good example of how the 3-D printer specialist is looking to leverage the long history of partnership between the two companies while aiming to move forward with innovative new ideas.

Still, 3D Systems will have to work hard to emerge victorious. A recent bearish assessment by Citron Research pointed to weakness in the company's Cube line of printers compared to Stratasys' MakerBot line. Stratasys also has the same general strategy as 3D Systems of boosting short-term expenses in order to maximize long-term growth, and its MakerBot Digitizer gives it a valuable weapon in the attractive 3-D scanning space that could be the next step forward for the industry as a whole. Meanwhile, even as ExOne expects sluggish revenue this year, the prospects for it, voxeljet, and other potential entrants to the space should remain another challenge for 3D Systems to overcome.

In the 3D Systems earnings report, watch closely to make sure that its results and guidance are consistent with its preliminary release earlier this month. With investors' expectations so high, it's crucial for 3D Systems to be open about its prospects and realistic about its future, while still acknowledging the huge growth opportunity that 3-D printing has for the future.

Is 3D Systems the best stock in the 3-D printing space?
The U.S. is finally in a position to dominate the global manufacturing landscape thanks to the revolutionary technology of 3-D printing. The trick now is to identify the companies -- and thereby the stocks -- that will prevail in the battle for market share. To see the three companies that are currently positioned to do so and how 3D Systems fares among them, simply download our invaluable free report on the topic by clicking here now.

Click here to add 3D Systems to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.


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  • Report this Comment On February 27, 2014, at 12:55 PM, galileo767 wrote:

    Scribner writes that she looks to revenue growth as the key metric in ranking success in the 3D space, given that the industry is in its early stages. Later, earnings per share will become the more relevant number, but for now “we believe investments in new products and technologies is more important than delivering on EPS.”

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