Great was the rejoicing when contract 3D-printing manufacturer Proto Labs (PRLB -2.00%) reported its big "earnings beat" this morning -- great, and temporary.
Before trading opened for the day, Proto Labs, which uses additive manufacturing to produce industrial prototypes and production parts for its customers, reported that its pro forma earnings for the fiscal first quarter 2020 came in at $0.61 per share, well above the $0.38 that Wall Street had predicted. (Sales of $115 million likewise trumped predictions for just $102 million in the quarter.)
At first, this news sent Proto Labs stock flying up 12.8% in early trading. But here at the market close, it had just a 4% gain.
Proto Labs may have beaten sales estimates, but its $115 million in Q1 revenue was up only 1.5% year over year. The company's pro forma profit of $0.61 was great, no doubt, and another beat. But actual GAAP earnings were only $0.52 per share, down 9% from last year's Q1.
The primary reason for the weak sales growth and weaker profits was the coronavirus pandemic. "During the first two and a half months of the first quarter of 2020, ordering trends were in line with our expectations," CEO Vicki Holt said. But by mid-March, she said, "as the global pandemic intensified and economic activity declined, ordering activity slowed."
And what will April, May, and the months beyond hold for Proto Labs? Here, the news is both bad and good. On the one hand, "the ultimate financial impact of the COVID-19 pandemic is unknown at this time," CFO John Way says. On the other hand, as early as late March, immediately following the coronavirus-inspired sales slowdown, Holt says, the company "began to receive orders for COVID-19 related parts --primarily injection molding in the Americas -- which helped mitigate the slowdown in other services and regions."
Whether this influx of new business in emergency-printing parts for use in treating the coronavirus will offset what looks like a very serious slowdown in mid-March, and get Proto Labs growing faster than single digits again in Q2, remains to be seen.
For now, analysts are forecasting a staggering 70% decline in profits in Q2. But if Proto Labs manages to pull off an upset, you can expect Wall Street analysts to be even more surprised next quarter than they were in this one.