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Why 3D Systems Stock Crashed After Earnings

By Rich Smith - Mar 2, 2021 at 11:53AM

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For the first time in four years, 3D Systems is profitable. Sort of.

What happened

Shares of 3D printer maker 3D Systems (DDD 0.48%) plunged in morning trading Tuesday -- down 12.7% as of 11:20 a.m. EST -- as investors responded to the company's fourth-quarter earnings report last night. But was the miss really all that bad? Was it even a miss at all?

Well, yes and no. On the one hand, analysts had forecast 3D would report $0.10 per share in pro forma profit for fiscal Q4 2020, and it reported only $0.09. That's an earnings miss. On the other hand, though, analysts only thought 3D would do $168.5 million in sales for the quarter, and it reported $172.7 million.  

That's a sales beat.

Simple red arrow declining stock chart on a white checked background

Image source: Getty Images.

So what

3D's sales climbed about 3% year over year for the quarter, and the company reported its first quarterly operating profit following four straight years of operating losses (according to data from S&P Global Market Intelligence).

Speaking of which, it's worth pointing out that the $0.09 per share in pro forma profit that 3D reported shrivels into a $0.16 per share net loss when calculated according to generally accepted accounting principles (GAAP). That may be one reason investors seem so disappointed with the news.

For the full year, sales shrank 12.5% to $557.2 million, and net losses doubled to $1.27 per diluted share.

Now what

Looking ahead to next year, CEO Jeff Graves noted that the company has already "achieved our target of $60M in run-rate cost savings by the end of 2020" and divested its "non-core assets."

"With proceeds from our initial divestitures and positive cash flow," he said, 3D "will continue to look for opportunities to invest in" such enterprises as dental and medical applications of 3D printing, where the company's sales grew 48% in 2020, aiming for "exciting growth, expanding applications, and increasing profitability."

On that last bit, management thinks it can achieve between 40% and 44% gross profit margin this year, up from just 40% for all of 2020. At the midpoint, this implies 42% gross margins for 2021 -- the same as the company earned in Q4, when its operating profits finally turned positive.

Investors' disappointment today notwithstanding, this seems to imply that 2021 might be the year 3D earns its first full-year operating profit since 2014 -- and if this happens, then that will be something to cheer about.

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