ExOne Co. Earnings: Will the Stock Bounce Back?

On Wednesday, ExOne (XONE +0.00%) will release its quarterly report, and shareholders are nervous about whether the 3-D printing specialist will be able to reverse the huge drop in its share price recently. Even as peers 3D Systems (DDD +1.62%) and Stratasys (SSYS +0.47%) face similar challenges in sustaining their growth in the highly promising industry, ExOne has to figure out whether its strategy to go after enterprise customers will give it a competitive advantage over its rivals.

The 3-D printing industry is evolving rapidly, and ExOne has struggled to figure out how to evolve along with it. At first, ExOne's products and services in working with metal products seemed like a huge competitive advantage over Stratasys and 3D Systems, but customers seemed to view ExOne's technology as threatening their own livelihoods rather than making things easier for them. The question is whether ExOne's move toward working directly with manufacturing companies will help it solve some of its problems. 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.

Source: ExOne.

Stats on ExOne

Source: Yahoo! Finance.

Can ExOne earnings finally meet expectations?
In recent months, investors have pushed back their expectations for ExOne earnings to become profitable, reversing original calls for a 2014 profit and cutting their 2015 estimates by more than half. The stock has dropped almost 30% since early February, which is on par with 3D Systems' decline and worse than the loss Stratasys has posted.

ExOne's first-quarter earnings report wasn't what growth investors had hoped to see from the 3-D printing company. Sales of printers dropped by 22% even though the number of printers sold jumped by 50%, reflecting a different product mix of lower-priced printers compared to a year ago. Overall revenue fell 16%, leaving it far shy of investor expectations. Negative guidance for the 2014 year also weighed on the stock, especially given the inherent volatility involved when a company sells a product that can cost more than $1 million. Even scarier was ExOne calling 2014 a transition year, further pushing out the anticipated ramp-up in sales that investors have waited for.

Source: ExOne.

ExOne's production-center business model works a lot differently from the way that Stratasys and 3D Systems make money. In particular, with their consumer-oriented products, 3D Systems and Stratasys count on high unit volume of outright sales in order to drive revenue and profit growth. By contrast, ExOne offers its production service centers to prospective clients on an on-demand basis, essentially allowing customers to use ExOne printers on a trial basis to see how they work. ExOne has used the model as a valuable tool for promoting sales, as many customers who start out as production service center clients move on to purchase their own 3-D printers in the long run.

Still, the challenge that retail investors face is trying to distinguish the potential opportunities of ExOne and its peers. Sky-high valuations prompted the recent deep correction in ExOne shares as well those of 3D Systems and Stratasys, and ExOne remains vulnerable to future share-price volatility as investors make dramatic reassessments of not only the company's potential but also that of the entire 3-D printing industry on the whole.

In the ExOne earnings report, watch to see how the company's product mix this quarter compares with previous results. Analysts might focus on the short run, but it's more important to identify trends and see where ExOne's business is headed rather than where it has already been.

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