Proto Labs (PRLB -0.35%), a quick-turn contract manufacturer, is slated to report its second-quarter 2020 results before the market open on Tuesday, July 28.
The company -- which offers both traditional manufacturing and 3D printing services -- will kick off the quarterly earnings season for the 3D printing space. The two largest pure-play 3D printing companies, 3D Systems and Stratasys, are both scheduled to release their results on Aug. 5.
Investors will likely be approaching the report with caution. It's a given the company's results were hurt by the COVID-19 pandemic since many of its industrial customers were shut down during at least part of the quarter.
Image source: Proto Labs.
That said, last quarter, Proto Labs easily surpassed Wall Street's profit estimate, so there's reason to believe that it might surprise to the upside again this quarter.
In 2020, Proto Labs stock is up 27% through July 23, compared with the S&P 500's 1.2% return.
Here's what to watch in Proto Labs' report.
Key numbers
|
Metric |
Q2 2019 Result |
Wall Street's Q2 2020 Consensus Estimate |
Wall Street's Projected Change |
|---|---|---|---|
|
Revenue |
$115.9 million |
$100.5 million |
(15%) |
|
Adjusted earnings per share (EPS) |
$0.71 |
$0.36 |
(49%) |
Data sources: Proto Labs and Yahoo! Finance.
Given the uncertainties surrounding the pandemic, management didn't issue quarterly guidance, as it historically has. However, on the April 30 first-quarter earnings call, CFO John Way provided some data on April's results, which we'll get to in a moment.
For context, in the first quarter, Proto Labs' revenue edged up 1.5% (or 2% in constant currency) year over year to $115.1 million. Growth was driven by increases in the 3D printing and sheet metal businesses, which was offset by a decline in the plastic injection molding business, the company's largest segment. CNC machine results were flat with the year-ago period.
Reported EPS slipped 9% to $0.52, and adjusted EPS fell 12% to $0.61. Despite the decline, that result still managed to crush the Wall Street consensus estimate of $0.38.
The company's balance sheet remains strong. It generated $22.4 million in cash from operations during the first quarter, and ended the period with cash and equivalents of $91.9 million.
Here's how CEO Vicki Holt described the pandemic's effect on the first quarter:
During the first two and a half months of the first quarter of 2020, ordering trends were in-line with our expectations. In mid-March, as the global pandemic intensified and economic activity declined, ordering activity slowed. In the last week of March, we 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.
On last quarter's earnings call, CFO Way shared the company's revenue performance in April, the first month of the second quarter:
In total, we have received approximately $9 million in COVID-19 orders and will recognize approximately $5 million of revenue on these orders in April. These orders, combined with the increase in production orders, have resulted in projected April injection molding parts revenue growth of approximately 25% and overall injection molding growth of approximately 15%. Collectively, our other services are down approximately 20% in April compared to the prior year.
The net result for April is a year-over-year revenue decline of approximately 5%. Excluding the COVID-19 orders, the April revenue decline would have been approximately 15%.
Third-quarter 2020 guidance
The market looks ahead, so its reaction to Proto Labs' earnings release will probably hinge more on the company's outlook rather than its Q2 results, relative to Wall Street's expectations.
For Q3, analysts are currently modeling for adjusted EPS of $0.41 on revenue of $104 million, representing declines of 46% and 11.5%, respectively, year over year.
