Proto Labs (NYSE:PRLB), which provides technology-enabled, quick-turn, traditional manufacturing and 3D printing services, is slated to report its third-quarter 2017 earnings before the market opens on Thursday, Oct. 26.

Proto Labs has a lot to prove when it reports, as its stock has gained a whopping 56.7% this year through Oct. 13, crushing the S&P 500's 15.9% return for this period. 

Operator standing in front of a CNC machine.

Image source: Proto Labs.

Benchmarks for key numbers

Here are Proto Labs' year-ago results, its third-quarter guidance, and Wall Street analysts' estimates to use as benchmarks.

Metric

Q3 2016 Result

Proto Labs' Q3 2017 Guidance

Analysts' Q3 2017 Consensus

Analysts' Projected Year-Over-Year Change

Revenue

$78.2 million

$83 million to $88 million

$84.45 million

8%

Adjusted earnings per share (EPS)

$0.51

$0.48 to $0.54

$0.52

2%

Data sources: Proto Labs and Yahoo! Finance.

Proto Labs' adjusted EPS outlook -- which equates to a year-over-year change in the range of negative 5.9% to 5.9% -- might appear rather weak compared to its revenue growth expectation. This is because its outlook factors in investments in the company's metrology lab.

Proto Labs has some good momentum going into earnings. In the first quarter, the company breezed by the Wall Street's consensus for both revenue and earnings. In the second quarter, it slightly beat analysts' expectations on both the top and bottom lines, with revenue increasing 9.4% -- or 12.8% when adjusted for discontinued services and the impact of foreign currency headwinds -- and adjusted EPS jumping 8.9% from the year-ago period. The headline numbers cloud the fact that the United States and Japan are performing very well, as the European business has been an anchor on overall results.  

In addition to the headline numbers, here's what to focus on in Proto Labs' report.

Progress on its three main goals 

CEO Vicki Holt reiterated last quarter that Proto Labs will be focused on three priorities in 2017:

  1. Improving sales and marketing productivity to drive growth in the number of new product developers and growth in revenue.
  2. Continued expansion of service offerings to fulfill more of its customers' needs.
  3. Improving gross margin to 58% to 60% of revenue.

Investors should continue to gauge Proto Labs' results against these goals. As for No. 3, gross margin was 56.5% last quarter, a slight increase from the 56.4% in the year-ago period. As for Nos. 1 and 2, management provides updates on progress on the conference call following the earnings release.

Industrial 3D printer printing a red plastic object.

Image source: Getty Images.

European business results -- particularly for injection molding and 3D printing

Europe is the company's weak geographic link, as previously mentioned. Last quarter, year-over-year revenue in the region declined 6.6% on a reported basis, though it grew 3.6% when adjusted for the negative impact of foreign currency and discontinued services. By contrast, year-over-year revenue jumped 14.5% in the U.S., and 8.2% -- or 11.5% in constant currency -- in Japan. 

Last quarter, Proto Labs' injection molding business posted year-over-year revenue growth of 4.5%, which was tepid compared with the double-digit growth in its CNC machining and 3D-printing segments. This business was particularly weak in Europe, so investors should home in on both the European results and the injection molding results to see if there appears to have been any improvement.

Lastly, investors should remain focused on 3D printing results in Europe. 3D printing revenue growth in Europe was flat last quarter. But this isn't a concern, in my view, as this is a rather new business the company entered via an acquisition made in late 2015. Rather than revenue, the primary concern is gross margin. Management has said that the margin for this business is lower than the margin for the 3D printing business in the U.S., which is something it's focused on improving. 

Beth McKenna has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Proto Labs. The Motley Fool has a disclosure policy.