3D Systems Stock Is Struggling Despite Earnings and Revenue Beats

3D Systems (DDD 2.02%) reported better-than-expected fourth-quarter and full-year 2021 results after the market close on Monday.

Shares opened nearly 15% higher on Tuesday, which is attributable to fourth-quarter revenue and earnings, along with full-year 2022 revenue guidance all sprinting by the Wall Street consensus estimates. However, shares quickly gave back that early gain and then some, and are down 0.95% at 1:03 p.m. ET today.

What gives? The company didn't provide earnings guidance for 2022, though the metrics for which it did provide outlooks suggest that it's possible the year's bottom line could come in lower than analysts had been anticipating. 

Moreover, it seems likely that some short-term traders decided that the stock's early-morning pop presented a good opportunity to take some money off the table. In addition, the market's been very volatile recently, stemming largely from the Russia-Ukraine war, so investors shouldn't expect what they'd consider to be rational reactions to earnings reports.

It's looking like Tuesday will continue to be a tug-of-war day between 3D Systems' bulls and bears. 

Now, let's get to the numbers.

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

3D Systems' key quarterly metrics

Data source: 3D Systems. GAAP = generally accepted accounting principles.

Investors should focus on the adjusted metrics, as they strip out one-time items. 

The quarter's GAAP gross margin was 43.9%, up from 42% in the year-ago period. Adjusted gross margin landed at 44.1%, up from 42.9% in the fourth quarter of last year. 

For the full year 2021, the company generated cash from operations of $48.1 million, compared with using cash of $20.1 million running its operations in 2020. Moreover, 2021's operating cash flow also exceeded that of the pre-pandemic year 2019's $31.6 million. 3D Systems ended the year with cash and cash equivalents of $789.7 million, and total debt of $460 million. 

In the fourth quarter, Wall Street was looking for adjusted EPS of $0.03 on revenue of $144.2 million, as outlined in my earnings preview. (The adjusted EPS consensus estimate was $0.04 at the time of the preview.) So, the company sped by both expectations.

For context, in the third quarter, 3D Systems' revenue rose 15% year over year (and 36%, excluding the impact of divestitures) to $156.1 million. That result easily beat the $144.5 million Wall Street had been expecting. Adjusted EPS was $0.08, up from a loss of $0.03 per share in the year-ago period. That result also breezed by the consensus estimate, which was for $0.05.

Segment results

Data source: 3D Systems. YOY = year over year.

Both segments performed solidly. The industrial segment's divestiture-adjusted growth is higher because it faced an easier year-ago comparable. That's because it was considerably hurt during the earlier stages of the pandemic, whereas the healthcare segment held up well.

What management had to say

Here's part of CEO Jeffrey Graves' (very lengthy) statement in the earnings release.

2021 was a remarkable year for 3D Systems. In the face of a difficult operating environment, we executed well against our four-phased strategy that we introduced in the summer of 2020. As a result, we exited 2021 as one of the largest and the most profitable pure-play additive manufacturing companies in the world, entering 2022 with great momentum, an extremely strong balance sheet, and focused on investing for the exciting growth we see ahead. ... [T]he impact of our lean organization structure and effective cost management has driven earnings per share higher than, not only 2020, but also our pre-pandemic 2019. 

2022 guidance

For full-year 2022, management guided for revenue in the range of $570 million to $630 million. This represents a contraction of about 7% to growth of 2% year over year. At face value, these numbers don't look good, but that's because of the loss of revenue from the noncore assets the company divested in 2021.

This revenue guidance is considerably higher at the midpoint than the 2022 revenue of $574.7 million Wall Street had been projecting.

The company didn't provide an earnings outlook for 2022. However, it did supply the following annual guidance: adjusted gross margin between 40% to 44% and adjusted operating expenses between $225 million and $250 million. For context, in 2021, adjusted gross margin was 43% and adjusted operating expenses were $214.7 million.

Continued progress on the turnaround

3D Systems capped off 2021 with another encouraging quarter.

It kicked off 2022 by announcing two acquisitions in the first quarter. The buyouts of Titan Robotics and Kumovis will add polymeric extrusion-based technology to the company's current portfolio of 3D printing technologies.