Shares of 3D printing pure plays 3D Systems (NYSE:DDD) and Stratasys (NASDAQ:SSYS) and 3D printing and conventional manufacturing service provider Proto Labs (NYSE:PRLB) fell 15.9%, 11%, and 15.3%, respectively, in February, according to data from S&P Global Market Intelligence.
For context, the S&P 500 index dropped 8.2% last month. The market's sell-off was driven by concerns that the spread of the novel coronavirus, COVID-19, could curb global economic growth.
In 2020, shares of 3D Systems, Stratasys, and Proto Labs are down 2.9%, 25.9%, and 17.2%, respectively, while the broader market has returned negative 7.7%.
We can attribute at least a portion of the three 3D printing stocks' poor performances last month to the weak general market. However, their underperformances were also due to their releases of anemic fourth-quarter 2019 results, disappointing guidance, or both these factors.
Proto Labs was the first of these three companies to report its quarterly results. After its Feb. 6 release, shares plunged 9.2% and they lost another 4% the next day. The S&P 500 rose 1% over this period.
In the fourth quarter, Proto Labs' revenue slipped 0.8% year over year to $111.9 million, earnings per share (EPS) dropped 21% to $0.56, and adjusted EPS fell 15% to $0.63. Wall Street was looking for adjusted EPS of $0.63 on revenue of $112 million. Both results were in line with expectations. Weaker-than-projected guidance was the culprit behind Proto Labs stock's plunge, as we'll get to in a moment.
Stratasys and 3D Systems reported their quarterly results on the same day, with Stratasys reporting before the market opened on Feb. 26 and its rival following after the closing bell.
Following its earnings release, Stratasys stock fell 4.5% and then another 13.1% the next day, before bouncing back 5.6% on the day after that. As I wrote in my earnings article, "We can attribute the market's reaction ... in part to quarterly revenue and earnings that both fell short of Wall Street consensus estimates, along with 2020 guidance on both the top and bottom lines that came in lighter than analysts had been expecting."
In Q4, Stratasys' revenue fell 9.5% year over year to $160.2 million. It posted a loss per share of $0.05, compared with earnings per share (EPS) of $0.12 in the year-ago period. Adjusted for one-time items, EPS declined 14% to $0.18.
On the two days following its earnings release, 3D Systems stock dropped 10.6%, compared with the S&P 500's decline of 5.2% over this period. The company beat the Q4 consensus estimate on both the top and bottom lines and didn't provide official guidance. So we can't know for sure why the market sent shares tumbling, but it's probably because the company's results were anemic even if they did surpass the Street's expectations. Moreover, investors were probably already feeling more uncertain than usual going into the release because the company had announced earlier in February that CEO Vyomesh Voshi had informed the board of his intention to retire. Joshi is reportedly staying on until his successor is hired.
In the fourth quarter, 3D Systems' revenue fell 8.9% year over year to $164.6 million. It posted a loss per share of $0.04, flat with the year-ago period. Adjusted EPS landed at $0.05, down 50% from the fourth quarter of 2018. Wall Street was looking for adjusted EPS of $0.01 on revenue of $163.7 million.
For first-quarter 2020, Proto Labs guided for revenue in the range of $111 million to $117 million, representing a decline of 3.6% to an increase of 1.6% year over year. It also expects adjusted EPS of $0.50 to $0.58, representing a decrease of 26% to 15%. Going into earnings, Wall Street had been projecting adjusted EPS of $0.67 on revenue of $115.3 million in the first quarter.
For full-year 2020, Stratasys guided for revenue of $620 million to $680 million, representing a decline of 2.5% to an increase of 6.9% year over year. It also anticipates adjusted EPS of $0.45 to $0.60 per share, representing a decrease of 19.6% to an increase of 7.1%. Going into the release, Wall Street had been modeling for 2020 revenue and adjusted EPS of $662.5 million and $0.63, respectively.
3D Systems didn't release official guidance.
The one common denominator behind all three companies' weak Q4 results? A soft industrial macroeconomic environment in international markets. The coronavirus epidemic is only going to make things worse on this front, so investors should stay away from these (and similar) stocks for now.
The fallout from COVID-19 is going to push the United States and the world into a recession, in my opinion. You should favor recession-resistant stocks.