What happened

In early trading Wednesday, Stratasys (SSYS 0.96%) stock looked to be heading for disaster -- down more than 16% after beating on earnings but missing on guidance in its latest earnings report, released this morning. As of 11:30 a.m. ET, however, the stock market rally appears to be turning things around for the 3D printer maker, and its shares are now down only 3.7%.  

So what

Analysts had forecast that Stratasys would lose $0.01 per share (adjusted) in its fiscal second-quarter 2022, on sales of $166.3 million. In fact, the company reported an adjusted profit of $0.02 per share, and its sales came in above expectations at $166.6 million -- up 13% year over year.

That all sounds like good news, but here's where things start going bad. "Adjusted" profits are not the same thing as profits that are calculated according to generally accepted accounting principles (GAAP). By that measure, Stratasys actually was not profitable at all. With gross profit margins sliding by 250 basis points in Q2, Stratasys lost $0.37 per share according to GAAP -- way more than even analysts' predicted loss of $0.01 per share and a loss 19% bigger than what Stratasys reported a year ago. The company was also free-cash-flow (FCF) negative in the quarter.

Compounding the problem, Stratasys then went on to warn that its sales for this year as a whole will be no more than $685 million -- whereas Wall Street is looking for $690 million in sales -- and that its GAAP loss could rise as high as $1.17 per share.

Now what

So long story short, Stratasys wasn't actually profitable in Q2, and it won't turn profitable later this year, either. Investors weren't pleased to hear any of this, and that's why they sold off the stock this morning.

As for why its shares are paring their losses in the afternoon, that's a bit of a mystery. On the one hand, revenue grew 13% in Q2 and Stratasys has a chance of continuing to grow at 13% throughout this year if it maxes out its guidance. On the other hand, the company looks likely to end 2022 with its 10th straight year of earning no profit at all and could potentially turn free-cash-flow negative (after generating positive FCF in both 2020 and 2021) as well.

Until Stratasys finds a way to turn profitable again, I simply don't see much reason to buy its stock.