Please ensure Javascript is enabled for purposes of website accessibility

Why Proto Labs Stock Just Dropped 9.5%

By Rich Smith - Feb 6, 2020 at 11:35AM

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

It wasn't so much the earnings that frightened investors, as the guidance.

What happened

Contract 3D printer Proto Labs (PRLB -0.86%), which produces custom-made 3D-printed parts for prototyping and short-run production for its customers, failed to print the right kinds of numbers for its shareholders in this morning's fiscal Q4 2019 earnings report -- and is being punished for it. Shares were down 9.5% as of 10:50 a.m. EST on Thursday.

Heading into Q4, analysts had told investors to expect $0.63 per share in pro forma earnings from Proto Labs, and sales of just under $112 million. It barely achieved that earnings estimate, and just missed the sales target at $111.9 million.

Chalkboard drawing of arrow going down over the word DOWN

Image source: Getty Images.

So what

That may not sound like much of a miss. But after growing sales a bare 3% for all of 2019, Proto Labs ended the year on a weak note with a 0.8% decline in sales in Q4.

As for profits, the company may have met expectations by the malleable standard of pro forma earnings. But as calculated by generally accepted accounting principles (GAAP), earnings for the quarter were only $0.56 per share, diluted -- and down 21% year over year.

Now what

Perhaps worst of all, the company guided investors to expect even more underperformance in the current first quarter of fiscal 2020. Instead of the $0.67 per share (again, pro forma) that Wall Street is expecting, Proto Labs says it's more likely to earn somewhere between $0.50 and $0.58, a huge earnings miss. The company's expected sales of $111 million to $117 million, when taken at the midpoint, also appear likely to fall short of the $115.3 million analyst consensus.

In short, it's the prospect of Proto Labs following up one missed guidance quarter with a second that's scaring off investors today.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Proto Labs. 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

Proto Labs, Inc. Stock Quote
Proto Labs, Inc.
PRLB
$46.03 (-0.86%) $0.40

*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
400%
 
S&P 500 Returns
128%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/16/2022.

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.