Please ensure Javascript is enabled for purposes of website accessibility

3D Systems Earnings: 4 Things to Watch

By Beth McKenna - Jan 23, 2020 at 10:00AM

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

3D Systems stock is soaring in 2020, so the 3D printing company has a lot to prove when it reports Q4 earnings.

3D Systems (DDD 2.95%) hasn't yet announced a date for the release of its fourth-quarter and full-year 2019 results, but it should be during the last week in February, or perhaps one of the first couple days in March.

The 3D printing company is approaching the report on a mixed note. Last quarter, it beat Wall Street's estimates on both the top and bottom lines. However, management provided soft fourth-quarter revenue guidance. Following the third-quarter release, shares dropped more than 3% in after-hours trading, but closed up 8.5% the next day. Apparently, investors felt more positive after they had time to digest the numbers and information shared on the earnings call.

3D Systems stock is coming back strong in 2020 after its poor showing last year. In 2019, shares declined 14%, compared to the S&P 500's 31.5% return. In 2020, they've shot up 30.7% through Jan. 22, versus the broader market's 2.9% return.

Here's what to watch in 3D Systems' report.

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

Image source: Getty Images.

Key quarterly numbers

Here are the year-ago quarter's results, the company's ballpark revenue outlook, and Wall Street's estimates to use as benchmarks.

Metric Q4 2018 Result Company's  Q4 Guidance  Wall Street's Q4 2019 Consensus Wall Street's Projected Change (YOY)

Revenue

$180.7 million

Roughly $161.5 million to $164.6 million* 

$163.7 million

(9.4%)

Adjusted earnings per share (EPS)

$0.10

N/A

$0.01

(90%)

Data sources: 3D Systems and Yahoo! Finance. YOY = year over year. *Management said it expected "mid-single-digit sequential revenue growth." The guidance range listed above represents 4% to 6% growth from the third-quarter's revenue.

Last quarter, the company's revenue declined 5.6% year over year. While that's far from the performance investors want to see, that decline was at least less steep than in the second quarter, when it was 10.9%, and in the first quarter, when it was 8.4%. However, as the table shows, analysts expect the year-over-year revenue decline to widen sequentially in the fourth quarter, to 9.4%.

What ails 3D Systems? In the second-quarter earnings release, CEO Vyomesh Joshi attributed the 2019 revenue struggles largely to the "ordering patterns of a large enterprise customer, the delay in shipping factory metals systems as we complete technical enhancements, and weaker macroeconomic conditions in some areas of our market." As for the factory metals systems, on last quarter's earnings call, Joshi said, "We are confident that we will ramp up our metal factory system solutions by the end of the first quarter of 2020."

3D printer sales

As always, a main focus should be on 3D printer sales. These sales account for about 20% of the company's total revenue, but they are much more important than that number suggests. That's because they drive sales of "consumables" -- 3D printing materials -- which sport high profit margins. 

In the third quarter, revenue from sales of 3D printers fell 17.2% year over year to $30.4 million. In the earnings release, the company said the decline was driven by the "timing of large enterprise customer orders and the softer macro industrial environment." For context, in the second and first quarters, 3D printer revenue dropped 27% and 29%, respectively, year over year.

Material sales 

Investors will want to see the year-over-year materials growth rate accelerate from last quarter's 2.8%, or at the very least not decelerate. While last quarter's growth rate was modest, it was notable since this metric hadn't been positive since the third quarter of 2018, when it was 2%.

Management had been strenuously asserting for some time that the materials revenue growth would resume in the second half of 2019 -- and the company came through last quarter. 

Cash flows

In 2019, one of 3D Systems' main focuses was cash generation. Indeed, that's because the company has been eating into the cash on its balance sheet. Its cash hoard was still a solid $127.6 million at the end of the third quarter, but that's down from $157.3 million at the end of the first quarter.

Last quarter, 3D Systems generated $6.5 million of cash from operations, which was down from the $18.7 million it generated in the second quarter. Both those results were much better than in the first quarter, when it used $15.2 million of cash in its operations.

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 Corporation Stock Quote
3D Systems Corporation
DDD
$10.46 (2.95%) $0.30

*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 service.

Stock Advisor Returns
327%
 
S&P 500 Returns
116%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/19/2022.

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.