3D Systems Earnings: What to Watch on Feb. 28

3D Systems (DDD 2.36%) is slated to report its fourth-quarter and full-year 2021 results after the market close on Monday, Feb. 28. An analyst conference call is scheduled for 4:30 p.m. ET on the same day.

The 3D printing company is approaching its release on a mixed note. On the positive side, it's been making good progress on its turnaround. And in each of the three quarters reported so far for 2021, it has beaten Wall Street's expectations for both revenue and earnings.

On the other hand, last quarter, management issued a full-year 2021 outlook for adjusted gross margin, 42%, that disappointed some investors. It implies the fourth-quarter result for this metric could be weaker than that for the first nine months of the year, which was 42.6%.

Investors should be prepared for 3D Systems stock to be volatile following the company's earnings release. I'll repeat my usual earnings preview warning: The volatility is partly due to the stock having a relatively substantial short interest. (Short-sellers are those who bet that a stock will decline.)

In 2022, 3D Systems stock is down 14.6% through Feb. 8, while the S&P 500 index is down about 5%. The stock's decline is probably in part due to market dynamics stemming from the expectation that the Federal Reserve will soon begin raising interest rates. Some investors have been rotating out of tech stocks and into stocks in sectors that tend to hold up better in a rising rate environment. 

In 2021, 3D Systems stock was, by far, the best-performing pure-play U.S.-listed 3D printing stock. Despite a big pullback following its surge early last year, it still managed to notch a 106% annual gain. The S&P 500 returned 28.7% in 2021. 

Here's what to watch in 3D Systems' Q4 report.

Image source: Getty Images.

3D Systems' key quarterly numbers 

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

Data sources: 3D Systems and Yahoo! Finance. 

Investors should know that Wall Street's expectation that 3D Systems' revenue will decline 17% year over year doesn't accurately reflect demand for the company's products. That's because over the last year, it's been divesting noncore assets. Management has been providing organic revenue and that's the more important revenue number. 

The company is facing a tough comparable for adjusted earnings. In the fourth quarter of 2020, its adjusted EPS surged 80% year over year. That was a particularly solid performance given that period was during the pandemic and the year-ago period (Q4 2019) was not.

For context, in the third quarter of 2021, 3D Systems' revenue rose 15% year over year (and 36%, excluding the impact of divestitures) to $156.1 million. That result sailed by the $144.5 million Wall Street had been expecting. Growth was driven by the healthcare segment, whose revenue jumped 28% (45%, adjusted for divestitures). The industrial segment's revenue increased 4% (28%, adjusted for divestitures).

Last quarter, adjusted EPS was $0.08, up from a loss of $0.03 per share in the year-ago period. That result easily exceeded the EPS of $0.05 that analysts had projected.

First-quarter 2022 guidance

Because the market looks ahead, 3D Systems stock's reaction to the upcoming release could hinge more on management's outlook than on fourth-quarter results. 

It remains to be seen, however, if management will begin issuing revenue and earnings guidance. Recently, it's only been issuing guidance for adjusted gross margin. This was understandable last year because the company was selling off noncore assets and because the earlier stages of the pandemic clouded visibility. But, hopefully, in 2022, management will get back to at least providing a quarterly revenue outlook.

For the first quarter of 2022, Wall Street is currently modeling for revenue to decline 9% year over year to $133 million. Analysts also expect adjusted EPS of $0.02, down from $0.17 per share in the year-ago period.