Please ensure Javascript is enabled for purposes of website accessibility

Stratasys' Earnings Increase; Stock Pops 20%

By Beth McKenna - Nov 1, 2018 at 9:55PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The 3D printing company hiked its full-year 2018 earnings guidance when it reported third-quarter earnings on Thursday.

Stratasys (SSYS -1.47%) reported third-quarter 2018 results before the market open on Thursday. Revenue increased nearly 4% year over year, GAAP loss per share narrowed significantly, and earnings per share (EPS) adjusted for one-time items jumped 38%. 

Shares soared to a closing gain of 19.9% on Thursday. We can likely attribute the market's exuberance to three factors: adjusted EPS coming in better than many investors were probably expecting, GAAP net loss narrowing to the point of almost breakeven, and the company increasing its full-year adjusted earnings guidance. 

Stratasys' results: The raw numbers

Metric

Q3 2018

Q3 2017

Year-Over-Year Change

Revenue

$162 million

$155.9 million

3.9%

GAAP operating income

$3.4 million

($6.9 million)

N/A

Adjusted operating income

$8.2 million

$8.1 million

--

GAAP net income

($0.7 million)

($10.2 million)

N/A

Adjusted net income

$5.7 million

$4.1  million

39%

GAAP EPS

($0.01)

($0.19)

N/A

Adjusted EPS

$0.11

$0.08 38%

Data source: Stratasys. GAAP = generally accepted accounting principles. 

Stratasys generated $5 million in cash from operations during the quarter and ended the period with $348.9 million in cash and cash equivalents.

GAAP gross margin was 48.7%, up from 48.3% in the third quarter of 2017. Adjusted gross margin edged down to 52.1%, from 52.5% in both the year-ago period and last quarter.

For some context -- though investors shouldn't pay too much attention to Wall Street's near-term estimates -- analysts were looking for adjusted EPS of $0.06 on revenue of $161.9 million. So Stratasys comfortably beat the earnings consensus and met the top-line expectation.

Close-up of an industrial 3D printer printing an unidentifiable red plastic object.

Image source: Getty Images.

What happened with Stratasys in the quarter?

Here's how segment results broke out for the quarter: 

Segment

Q3 2018 Revenue

Year-Over-Year Change

Product

$109.6 million

1.1%

Service

$52.4 million

10.3%

Total

$162 million

3.9%

Data source: Stratasys. 

Service revenue growth drove overall revenue growth. Within products, 3D printer revenue was flat; consumables (print materials) revenue increased 3%; and customer support revenue, which mainly includes revenue from service contracts, jumped 7%.

While one quarter doesn't make a trend, 3D printer revenue coming in flat with the year-ago period is encouraging. In the second quarter, this metric declined 8.2%, while it dropped 21% in the first quarter. 3D printer sales are central to the company's business model in that they drive sales of the high-profit-margin print materials, and service contracts. 

What management had to say

Here's what interim CEO Elan Jaglom had to say in the press release:

We are pleased with our results this quarter, reflecting continued strength in our high-end systems orders, utilization rates and our parts services business. The level of engagement we are experiencing with customers in our key verticals is encouraging, as we highlighted at the recent International Manufacturing Technology Show. And we are excited about the innovation we plan to bring to market to drive incremental, long-term opportunities, as we continue to invest in new products and materials across our portfolio of FDM and PolyJet technologies, our new metal additive manufacturing platform, and advanced composite materials.

Looking ahead

Certainly, Stratasys made good progress in the quarter with GAAP EPS nearly breakeven and adjusted EPS solidly increasing. That said, keep in mind a sustainable turnaround will depend upon the company being able to profitably grow revenue -- and while there was revenue growth in the quarter, it was a modest 4% year over year. 

The company narrowed its full-year 2018 revenue guidance range, with the midpoint slightly decreasing, and increased its full-year adjusted EPS outlook. While the higher earnings guidance is naturally a positive, part of the increase appears to be due to the company ratcheting back its full-year projection for capital expenditures by $5 million at the midpoint.

Metric

Current 2018 Guidance

Previous 2018 Guidance

2017 Result

Projected Year-Over-Year Change

Revenue

$670 to $680 million

$670 million to $700 million 

$668.4 million

1% at midpoint

GAAP EPS

($0.19) to ($0.04)

($0.75) to ($0.46) 

($0.75)

Loss narrowing by about $0.64 at midpoint

Adjusted EPS

$0.50 to $0.55

$0.30 to $0.50

$0.45

11% to 22%

Data source: Stratasys.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Stratasys Ltd. Stock Quote
Stratasys Ltd.
SSYS
$18.72 (-1.47%) $0.28

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
332%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/28/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.