Please ensure Javascript is enabled for purposes of website accessibility

2 Key Things From 3D Systems Earnings Call That Investors Should Know

By Beth McKenna - Mar 21, 2021 at 12:40PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The 3D printing company's CEO expects revenue growth to accelerate and pent-up demand for healthcare to be a growth driver.

Earlier this month, 3D Systems (DDD -1.25%) reported fourth-quarter and full-year 2020 results. For the quarter, the 3D printing company's revenue rose 2.7% year over year to $172.7 million, driven by strength in the healthcare segment. Adjusted for one-time items, net income widened 93% to $10.6 million, which translated to an 80% jump in earnings per share (EPS) to $0.09.

Shares plunged 19.6% the following day. The fact that the results were preliminary and that management didn't issue revenue or earnings guidance probably helped drive the market's negative reaction. "Both these things add to uncertainty -- and the market hates uncertainty," as I wrote in my earnings article

Some investors also might have been concerned that the slight Q4 adjusted EPS -- by just $0.01 -- missed the Wall Street expectation, though it seems unlikely that was a noble factor. In addition, general market dynamics probably played at least a minor role. During the time the company reported, investors were rotating out of highly valued so-called growth stocks, particularly those in the technology realm, because of concerns about heating up inflation. 

Despite its more recent pullback, 3D Systems stock is still up 174% this year through March 19. The S&P 500 has returned 4.6% over this period.

Earnings releases tell only part of the story. Following are two key things from the company's Q4 earnings call that investors should know.

Close-up of 3D printer producing a plastic green pineapple.

Image source: Getty Images.

1. Revenue growth in the double-digit percentages is "attainable" in 2021 

From CEO Jeffrey Graves' remarks:

I think the double-digit [year-over-year revenue] growth rate is perfectly attainable in our core business. ... [There could] be some short-term noise as we may or may not choose to divest some assets. ... But when you look at our core additive manufacturing business, I'm very bullish on double-digit growth.

As to this comment, the "core business" would exclude any acquisitions or divestitures the company makes in 2021. Graves prefaced his assertion by saying it's based on the negative impacts of the receding COVID-19 pandemic and rebounding global economies.

2. Pent-up demand for healthcare is poised to be a growth driver in 2021 and beyond

From Graves' remarks:

I'm particularly excited around healthcare. I think a lot of folks put off healthcare treatments during the COVID period, and [in the fourth quarter] they've come back strongly in both dentistry and other medical applications. 

I think, once we get through summertime, unless these variants in the virus prove to be substantial, it looks like that momentum will continue and just continue to accelerate as the world opens. 

I agree with Graves that the company's healthcare business has significant growth potential over the near and intermediate terms, for the reason he outlined.

It's a given that increased revenue growth in the healthcare segment would be a good thing. But it's an even better thing when you consider that the healthcare business "brings a bit higher gross margin on average than our industrial business," as Graves said. In other words, revenue growth in the healthcare business should have an outsize positive effect on the company's bottom-line results.

That said, competition in the 3D-printing healthcare arena is heating up. Last week, for instance, Desktop Metal (DM 0.98%) announced the launch of Desktop Health when it released its fourth-quarter results. This new business unit will focus on patient-specific healthcare products.

Desktop Metal now has polymer 3D-printing capabilities thanks to its recent acquisition of EnvisionTEC, meaning it can compete in a wider variety of healthcare applications. Moreover, it's flush with cash because it just joined the public markets in December. It went public through a reverse merger with a special-purpose acquisition company, which is faster and less expensive than the traditional initial public offering route. 


Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

3D Systems Corporation Stock Quote
3D Systems Corporation
$10.27 (-1.25%) $0.13
Desktop Metal, Inc. Stock Quote
Desktop Metal, Inc.
$2.05 (0.98%) $0.02

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/23/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.