3D Systems (DDD +27.30%) is slated to report its third-quarter 2018 earnings after the market closes on Tuesday, Oct. 30.
It's on track to be the first of the two big pure-play 3D printing companies to report, as Stratasys is scheduled to release its earnings on Nov. 1.
While it's pulled back since notching a 52-week high in late August, 3D Systems stock is still up 92.3% in 2018 through Oct. 19. The S&P 500 has returned 5.1% so far this year, while Stratasys stock has edged up 0.6%.
Image source: 3D Systems.
Key numbers
Here are the year-ago quarter's results to use as benchmarks.
|
Metric |
Q3 2017 Result |
|---|---|
|
Revenue |
$152.9 million |
|
Adjusted earnings per share (EPS) |
($0.20) |
Data source: 3D Systems and Yahoo! Finance.
Wall Street expects 3D Systems to deliver revenue of $171.9 million, representing growth of 12.4% year over year, and is projecting that adjusted EPS will flip from negative to positive and come in at $0.03. Long-term investors shouldn't place too much importance on the Street's near-term estimates, but they can be helpful to know, because they often help make sense out of market reactions.
3D Systems is going into its report on a solid note with respect to revenue growth. Last quarter, revenue rose 11% year over year, driven by strength in overall 3D printer sales and healthcare products and services. This performance represented a decent uptick from the first quarter's 6.1% year-over-year growth. Moreover, the consecutive increase was bigger than these numbers suggest, since the second quarter's revenue growth was entirely organic, while the first quarter's growth benefited from the company's acquisition of a dental materials maker in the first quarter of 2017.
The earnings story, however, hasn't been as positive. Last quarter, GAAP earnings per share were flat with the prior year's period, while adjusted EPS declined 25%. In the first quarter, the company's GAAP loss per share more than doubled, and on an adjusted basis, its results flipped to negative from positive.
The prior two quarters' numbers suggest that 3D Systems might be sacrificing some profit for increased sales. Solid revenue growth with earnings -- at least adjusted earnings -- at least flat with the year-ago period would be a good sign.
3D printer revenue
In the second quarter, 3D printer revenue soared 41% year over year, while the number of units sold jumped 37%. This performance represents an acceleration of the first quarter's revenue growth of 24%. The metric was roughly flat in the fourth quarter of 2017, after declining for several years. Two consecutive quarters of revenue growth like this would generally signal a strong rebound in demand for a company's products. Demand, however, might not be quite as robust as these metrics suggest for the reason previously mentioned: In the first half, profitability metrics, including gross margin, mostly decreased year over year, suggesting lower prices could be one factor in boosting sales.
3D printer sales accounted for just 22% of 3D Systems' total revenue in the second quarter, but this business has an outsize importance. 3D printers sales drive future sales of high-margin print materials.
Figure 4 sales
Investors should key in on sales of Figure 4 systems, including information shared on the earnings call about management's outlook for future sales. (Figure 4 is a fast, scalable stereolithography 3D printing system for producing small plastic parts.) Figure 4 is very important to the company's long-term success, as competitors -- namely, HP Inc. and venture-funded Carbon -- have launched speedy printers for producing plastic parts.
Last quarter, 3D Systems sold one system to the unnamed Fortune 50 company that had been beta-testing a system. In last quarter's earnings presentation, the company said that "[t]roughout the remainder of 2018, we expect to start shipping modular Figure 4 systems."
