3D Systems Earnings on Tap -- Here's What to Watch

3D Systems (DDD 2.31%) is slated to report its second-quarter 2018 earnings after the market close on Tuesday, Aug. 7

Unlike the last two quarters, its main rival in the diversified 3D printing space, Stratasys, isn't scheduled to report on the same day. Stratasys already reported its results: On Aug. 1, it turned in results better than what most investors were likely expecting.

3D Systems is approaching earnings with its shares up more than 48% in 2018 through Aug. 3, though they're down nearly 25% over the one-year period through the same date. The S&P 500 has returned 7.4% so far in 2018 and nearly 17% over the past year, while Stratasys stock has gained 10% this year and is down 9.4% over the past year.

Image source: Getty Images.

Key numbers

Here are the year-ago quarter's results to use as benchmarks.

Data source: 3D Systems.

This will be the first time since the fourth quarter of 2016 that investors will have a "clean" year-over-year revenue comparison. 3D Systems' acquisition in the first quarter of 2017 of a maker of dental materials has clouded the company's organic revenue growth over the past year. More specifically, it's clouded the company's organic revenue growth in its healthcare and materials classifications. 

Wall Street expects 3D Systems to deliver adjusted EPS of $0.01 on revenue of $165.9 million, representing an 88% decline and a 4.4% increase, respectively, over the year-ago period. While long-term investors shouldn't place too much importance on the Street's near-term estimates, they're helpful to keep in mind because they often help make sense out of market reactions. 

For a wider perspective, in the first quarter, 3D Systems' revenue increased 6.1% year over year, while its GAAP loss widened 11% to $0.10 per share. On an adjusted basis, the company posted a loss of $0.03 per share, versus EPS of $0.06 in the year-ago quarter.

In addition to the key numbers, here's what to focus on in the report.

3D printer revenue

In the first quarter, 3D printer revenue increased 24% from the year-ago quarter -- a surprisingly strong result. This metric was approximately flat in the previous quarter, the fourth quarter of 2017, after steadily declining for about three years. Last quarter's result was encouraging, but investors should be looking for a couple of more quarters showing growth in this metric to feel confident there's a true rebound in demand for the company's 3D printers. Moreover, with gross margin and other measures of profitability declining on a year-over-year basis last quarter, it's possible the uptrend in 3D printer revenue last quarter was driven by the company's sacrificing some profitability for sales.

The reason 3D printer sales are particularly important is that they're the driver of recurring sales of high-margin print materials in the company's razor-and-blade-like business model.

Figure 4 sales

Production systems based on Figure 4 technology were due to begin shipping this summer, according to management's remarks on last quarter's earnings call. (Figure 4 is a speedy, scalable, robotic, stereolithography, or SLA, 3D printing system designed to produce small plastic parts.) So investors should expect some commentary on this topic on the earnings call.

Last year, CEO Vyomesh Joshi said management expected Figure 4 to be a "significant" catalyst for growth in 2018. So investors should get some idea this quarter -- or next quarter at the latest -- if that expectation looks likely to pan out.

2018 guidance

We'll be just over seven months through the year when 3D Systems releases earnings. So it seems reasonable to expect that management would be able to provide an outlook -- even if not "official" -- for the company's full-year 2018 financial performance.