Please ensure Javascript is enabled for purposes of website accessibility

3D Systems Earnings: What to Watch

By Beth McKenna – Aug 5, 2019 at 8:15AM

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

On Aug. 7, when the 3D printing company reports its second-quarter earnings, focus on revenue growth, sales of 3D printers, and cash flows.

3D Systems (DDD 1.68%) is slated to report its second-quarter 2019 results after the market closes on Wednesday, Aug. 7.

Like last quarter, it will be the latter of the two leading pure-play 3D printing companies to report. Rival Stratasys (SSYS -0.40%) released its results on Wednesday, July 31.

Shares of 3D Systems are down nearly 17% in 2019 through Friday, Aug. 2. For context, shares of Stratasys have gained about 37% over this period, while the S&P 500 has returned just over 18%.

A big industrial 3D printer printing a red plastic object.

Image source: Getty Images.

Key numbers

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

Metric

Q2 2018 Result

Revenue

$176.6 million

Adjusted earnings per share (EPS)

$0.06

Data sources: 3D Systems and Yahoo! Finance.

3D Systems' management has not provided any guidance. For the quarter, Wall Street expects the company to deliver an adjusted loss per share of $0.04 on revenue of $160.7 million. In other words, analysts are projecting that revenue will decline 9% year over year and that adjusted EPS will flip from positive to negative. While long-term investors shouldn't place much weight on the Street's near-term estimates, they can be helpful to keep in mind, as they often help make sense out of market reactions.

All eyes will be watching revenue closely, as year-over-year growth has decelerated over the last three quarters. Moreover, last quarter, revenue declined -- by 8.4% year over year. For context, in the second quarter, Stratasys' revenue edged down 4.1% (or 1% after adjusting for divestitures and the impact of foreign exchange) from the year-ago period, which management largely attributed to "significant economic weakness in Europe."

Sales of 3D printers and materials

Beyond the headline numbers, investors' top focus should be on 3D printer sales. Last quarter, revenue from sales of 3D printers dropped 29% year over year, while the number of units sold soared 90%. Sales of 3D printers are central to 3D Systems' razor-and-blade-like business model, in that they drive recurring sales of high-profit-margin print materials.

On that note, material sales have been weak. Last quarter, revenue from sales of materials slipped 3% year over year. And in 2018, this metric edged up 1%. On recent earnings calls, management has said that it expects the growth rate for materials to increase beginning in the second half of this year.

Cash flows

Investors should continue to monitor 3D Systems' cash flows. While the company has a solid cash position -- it ended last quarter with $157.3 million of cash on hand -- it's been struggling to generate cash from operations, let alone positive free cash flow.

In the first quarter, the company used $15.2 million of cash in operations, and in 2018, it generated only $4.8 million in cash from operations. By comparison, last year, Stratasys generated $63.7 million in cash from operations.

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.

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

3D Systems Stock Quote
3D Systems
DDD
$9.07 (1.68%) $0.15
Stratasys Stock Quote
Stratasys
SSYS
$14.88 (-0.40%) $0.06

*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
342%
 
S&P 500 Returns
110%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/05/2022.

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.