Stratasys Ltd. (NASDAQ:SSYS) is slated to report its third-quarter 2017 earnings before the market opens on Tuesday, Nov. 14.

The diversified 3D printing company is going into its report with its stock up 23.6% in 2017, through Friday, versus the S&P 500's 17.3% return. Shares of prime rival 3D Systems (NYSE:DDD) are down 34% for the period.

Given Stratasys stock's outperformance and 3D Systems' poor third-quarter earnings released on Oct. 31, the market is likely primed to thrash the stock if the company posts weaker-than-expected earnings and/or lowers its full-year 2017 guidance. Investors sent shares of 3D Systems plunging to a closing loss of 24% following its worse-than-expected results and withdrawal of 2017 guidance.

Close-up of a 3D printer head printing a unidentifiable, bright-green plastic object.

Image source: Getty Images.

Key numbers

Here are Stratasys' year-ago results and Wall Street analysts' estimates to use as benchmarks.

Metric

Q3 2016 Result

Wall Street Q3 2017 Consensus

Wall Street Projected Year-Over-Year Change

Revenue

$157.18 million

$160.97 million

2.4%

Adjusted EPS

$0.00

$0.05

(N/A -- percentage change) $0.05

Data sources: Stratasys and Yahoo! Finance. EPS = earnings per share.

Unlike 3D Systems, which also whiffed in the second quarter, Stratasys has been doing a good job of meeting or beating Wall Street's estimates so far in 2017. Last quarter, it turned in adjusted EPS of $0.17, breezing by the consensus of $0.07. In the first quarter, it met analysts' adjusted EPS target of $0.05 on the bull's-eye. 

Beyond the headline numbers, here's what to focus on in Stratasys' report.

3D printer sales 

Investors should remain focused on 3D printer sales. Sales of 3D printers are central to Stratasys' razor-and-blade-like business model: Sales of printers drive recurring revenue from sales of the high-margin print materials, as well as maintenance contracts. Considering the revenue generated from 3D printer sales, rather than the number of units sold, provides a glimpse into pricing pressures from increased competition.

Stratasys' 3D printer revenue picture for the last four quarters looked like this:

  • Q2 2017: Decline of 6% year over year
  • Q1 2017: Decline of 11%
  • Q4 2016: Decline of 4%
  • Q3 2016: Decline of 20%

In the third quarter, 3D Systems' revenue from 3D printer sales dropped 11% year over year, after slipping 14% in the third quarter.

Stratasys and 3D Systems have been struggling to sell 3D printers since 2015. One initial reason was a glut of 3D printers in the field due to the companies' robust sales of printers in the preceding couple years. Another factor that's been at play since at least last year is increased competition in the polymer 3D printer space from new entrants HP Inc. and Carbon. Indeed, 3D Systems' CEO acknowledged on the recent earnings call that the company is experiencing "aggressive" competition from these two new players.

Other things to watch: Next-gen techs, metal initiatives, and competition in general

Stratasys has been developing three next-generation 3D printing technologies aimed at manufacturing applications: Infinitive Build, Robotic Composite, and Continuous Build. It's working with some impressive partners on these endeavors, including Ford, Boeing, and Siemens. Hopefully, management will provide a status update on the earnings call.

Stratasys has recently been increasing its exposure to metal 3D printing. In 2017, it announced a strategic investment in LPW Technology, which supplies metal powder solutions to the 3D printing industry, and announced a strategic partnership with Desktop Metal, a start-up that makes metal 3D printers. I'd be looking for an update on these initiatives if I were an investor. 

Lastly, hopefully management will also provide some commentary on the competitive pressures the company is facing, notably from HP and Carbon. That said, it's natural for companies to talk up their products and future potential and downplay competition. So investors should be more focused on cold, hard numbers -- which always reflect competitive pressures -- rather than putting too much stock into management comments. 

Beth McKenna has no position in any of the stocks mentioned. The Motley Fool recommends 3D Systems and Stratasys. The Motley Fool has a disclosure policy.