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Why Stratasys Stock Just Dropped 11%

By Rich Smith - Nov 13, 2019 at 11:17AM

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The maker of 3D printers had an earnings beat, but came up short on sales.

What happened

Shares of 3D-printer maker Stratasys ( SSYS 0.83% ) got walloped this morning -- down 13% in early trading before clawing their way back to something more like an 11% loss as of 10:45 a.m. EST on Wednesday.

The reason: earnings -- or more precisely, sales.

Stratasys posted a beat on earnings in its fiscal Q3 2019 financial results released Wednesday morning, at $0.12 per share, where Wall Street had expected only $0.11. But sales for the quarter came in light: $157.5 million, short of the consensus number of $162.1 million.  

Cartoon analysts confused by a falling stock chart

Image source: Getty Images.

So what

Wall Street is interpreting this as a miss, and probably rightly so.

After all, the earnings numbers discussed above were all of the pro forma variety -- not lining up with generally accepted accounting principles (GAAP). Actual GAAP results for the quarter were a $0.13 per share loss, and thus 13 times worse than the $0.01 per share Stratasys lost in the year-ago quarter. And free cash flow ran negative as well. All of which kind of flies in the face of interim CEO Elchanan Jaglom's assertion that the numbers "reflect a continuation of our track record of delivering earnings and profitability."  

Despite boosting its gross profit margin by 50 basis points (to 49.2%), Stratasys allowed its selling, general, and administrative expenses to balloon 20% in the face of a 3% decline in sales, pushing GAAP results deeply into the red.

Now what

Rounding out the bad news, the company guided investors to expect a full-year GAAP loss between $0.05 and $0.31 per share (although management emphasized that its pro forma result will show a profit of $0.55 to $0.70).

Whichever flavor of earnings you prefer, though, Stratasys' sales result is almost certain to disappoint. Instead of the $670 million to $700 million it had previously promised, or the $667 million Wall Street is expecting, Stratasys warned that it will now more likely end up with sales of only $640 million to $655 million for the year -- a miss by any measure.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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