Stratasys Earnings: What to Watch on March 1

Stratasys (SSYS 2.66%) is slated to report its fourth-quarter and full-year 2020 results before the market open on Monday, March 1. Its conference call with analysts is scheduled to follow at 8:30 a.m. EST.

Investors will likely be approaching the 3D printing company's report with more optimism than in earlier quarters in 2020, a year in which the COVID-19 pandemic has resulted in soft demand from many customers in the industrial sector. That's largely because in early January rival 3D Systems (DDD), which has a similar business profile, preannounced unofficial fourth-quarter results that were considerably better than Wall Street had been expecting.

Moreover, in the third quarter, Stratasys comfortably beat the analyst consensus estimate for revenue and also surpassed the earnings projection.

The stock price momentum in the 3D printing space certainly reflects investor optimism. In 2021, Stratasys stock has soared 137% through Feb. 16, while 3D Systems stock has skyrocketed 357%. The S&P 500 has returned just under 5% over this period.

Here's what to watch in Stratasys' Q4 report.

A 3D printer at work. Image source: Getty Images.

Key quarterly numbers 

Here are the company's results from the year-ago period and Wall Street's consensus estimates to use as benchmarks.

Data sources: Stratasys and Yahoo! Finance. YOY = year over year.

For the fourth quarter, analysts' expectations are low from a year-over-year standpoint, as the chart shows. However, the revenue expectation represents a 5.6% sequential improvement from the third quarter. The bottom-line estimate also represents a sequential upturn. 

Indeed, the revenue consensus is based on Stratasys CFO Lilach Payorski's statement on last quarter's earnings call that, "We are now almost halfway through the fourth quarter, and while there is still uncertainty about the pace of COVID-19 recovery, we currently expect to see sequential revenue growth of about 5% to 7%."

For context, in the third quarter, Stratasys' revenue fell 19% year over year to $127.9 million, easily topping the $121.7 million consensus estimate. Adjusted for one-time items, it posted a net loss of $3 million, or $0.05 per share, down from net income of $6.3 million, or $0.12 per share, in the year-ago period. Wall Street had been looking for an adjusted loss per share of $0.07.

Despite last quarter's reported loss, the company still managed to generate cash from operations to the tune of $2.6 million.

3D printer and material sales 

As always, investors should continue to focus on sales of 3D printers and print materials. As I wrote last quarter: "This data reflects how well the company's razor-and-blade business strategy is working. Sales of 3D printers (the "razors") are ultra-important because they drive sales of print materials (the "blades"), which have high profit margins."

Last quarter, Stratasys' 3D printer revenue dropped 21% year over year, and print materials revenue fell 22%. These year-over-year declines were an improvement from the deep plunges in the second quarter, when these metrics were 36% and 31%, respectively.

Stratasys is scheduled to report its Q4 results before the market open on Monday, March 1.