Proto Labs (PRLB -0.47%), which provides technology-enabled quick-turn traditional manufacturing and 3D printing services, is slated to report its second-quarter 2017 earnings before the market opens on Thursday, July 27.
Proto Labs has a lot to prove when it reports, as its stock has gained a whopping 39.1% this year through July 21, far outpacing the S&P 500's 11.7% return. Like 3D printing stocks in general, the stock had struggled for the previous few years, as valuations deflated when the strong growth investors were betting on didn't materialize.
Image source: Proto Labs.
Benchmarks for key numbers
Here are Proto Labs' year-ago results and Wall Street analysts' estimates to use as benchmarks.
|
Metric |
Q2 2016 Result |
Analyst Q2 2017 Consensus |
Analysts' Projected Year-Over-Year Change |
|---|---|---|---|
|
Revenue |
$75.0 million |
$80.9 million |
7.9% |
|
Adjusted earnings per share (EPS) |
$0.45 |
$0.48 |
6.7% |
Data sources: Proto Labs and Yahoo! Finance.
Proto Labs has some good momentum going into earnings. In the first quarter, it breezed by analysts' expectations for both revenue and earnings, with revenue increasing 10.5% -- 13.9% when adjusted for discontinued services and the impact of foreign currency headwinds -- and adjusted EPS jumping 16% from the year-ago period. While long-term investors shouldn't place too much weight on Wall Street's near-term estimates, they're useful to know since they often help explain market reactions.
In addition to the headline numbers, here's what to focus on in Proto Labs' report.
Progress on its three main goals in 2017
CEO Vicki Holt said earlier this year when the company released its fourth-quarter 2016 results that Proto Labs will be focused on three priorities in 2017:
- Improving sales and marketing productivity to bring in new product developers and generate increased revenue.
- Continued expansion of service offerings to capture more of its customers' needs.
- Improving gross margin to 58% to 60% of revenue.
Investors will be able to gauge progress on No. 3 directly from the company's financial results, while management will no doubt provide an update on the progress on Nos. 1 and 2 during the analyst conference call.
Image source: Getty Images.
3D printing results – specifically the European business' results
The company's relatively new 3D printing business had been growing faster than its other two businesses until last quarter. In the first quarter, the 3D printing business posted year-over-year revenue growth of 10.7% and accounted for 12.7% of total revenue. While this is solid growth, it was below the company's expectations. It also lagged the growth of the injection molding (of plastics) and CNC machining (of metals) segments, which grew revenue 11% and 16.4%, respectively.
The slowdown in 3D printing revenue was due to flat revenue in the company's European 3D printing business. This isn't a concern at this point, since Proto Labs only acquired this business in the fourth quarter of 2015, when it bought German service bureau Alphaform's 3D printing and injection molding operations. While it would be great to see some revenue improvements on this front, investors shouldn't be too concerned if things remain stagnant for another quarter or two, in my opinion. It takes a while to integrate new acquisitions.
In summary, Proto Labs' progress on its three main 2017 goals and its 3D printing business' results are two key things that investors should focus on in its report and on the conference call.
