ExOne Co. Earnings: What to Expect Wednesday

ExOne (XONE) will release its quarterly report on Wednesday, and shareholders have had to endure huge amounts of volatility recently as ExOne and peers Stratasys (SSYS 0.96%) and 3D Systems (DDD 2.31%) go through the inevitable growing pains of a new and promising industry. With ExOne having successfully posted an operating profit for the first time last quarter, though, expectations are high that the company will continue to make progress and position itself for further growth.

ExOne isn't the best-known 3-D printing stock, as 3D Systems and Stratasys have the popular advantage of having more consumer-facing tools. Yet ExOne's enterprise focus arguably has greater long-term potential, as the sophisticated goods that businesses need typically justify the higher capital expenditures that 3-D printers from high-end manufacturers require. Let's take an early look at what's been happening with ExOne over the past quarter and what we're likely to see in its report.

M-Flex. Image source: ExOne.

Stats on ExOne

Source: Yahoo! Finance.

Are ExOne earnings vulnerable?
Analysts have pulled back extensively on their projections for ExOne earnings, cutting their fourth-quarter estimates by $0.12 per share and slashing full-year 2014 projections by about 40%. The stock has taken a hit as well, falling 23% since early December.

ExOne's third-quarter results were extremely strong, with revenue jumping 36% as the company sold twice as many printers as it did during the year-ago quarter. Particularly encouraging was 20% revenue growth from the company's production service centers, where customers can go to use ExOne printers on an as-needed basis without having to commit to the full expense of owning a printer of their own. Given how much more expensive its printers are compared to consumer-printers from 3D Systems and Stratasys, ExOne has plans to make its production service centers account for about half of its overall revenue within the next two years.

But early evidence shows that ExOne's fourth quarter didn't go as well as investors had hoped. In January, ExOne lowered its fourth-quarter sales guidance by between 12% and 17%, citing timing issues that forced would-be buyers to delay their purchases beyond the end of 2013. CEO Kent Rockwell fully believes that these orders will be completed by mid-2014, thereby simply deferring sales growth rather than losing those customers permanently. Combined with pressures on Stratasys and 3D Systems to ramp up spending on research and development at the expense of current profitability, investors in 3-D printing stocks throughout the industry saw substantial declines following the news.

Still, one area where ExOne has a chance to shine is in metal printing. General Electric (GE -3.19%) bought metal 3-D printing specialist Morris Technologies in late 2012, and that greatly limited the availability of 3-D printing capacity of metal products for other customers. Rival Arcam has technology that's arguably better suited for the highest areas of demand for metal fabricated parts, such as the aviation industry. Yet ExOne still has the ability to make useful metal-based products for enterprise customers, and even though 3D Systems bought Phenix Systems last year to bolster its metal capability, ExOne has a longer history in the key niche.

In the ExOne earnings report, watch to see how the company's industrial focus is taking shape. With so many opportunities to expand, ExOne will need to work on making sure it can close sales and get revenue coming in to support its efforts and make its printers even better in the future.

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