3D Systems stock closed down 10.6% on Thursday to $50.13 per share after the company missed both analysts' revenue and earnings estimates when it announced its second-quarter 2014 results before the market opened. 

The leading 3-D printing company's revenue rose 25% from the year-ago period to $151.5 million, falling short of the consensus estimate of $162.3 million. Its adjusted earnings per share decreased 20% to $0.16, while analysts were looking for $0.18. 3D Systems' earnings have been under pressure since the company upped its growth game in the fourth quarter of 2013. This entails intentionally sacrificing short-term profits for increased spending on growth initiatives -- such as acquisitions and research and development -- intended to fuel long-term growth.

3D Systems' product revenue in Q2 increased 20% to $100 million, while services revenue rose 38% to $51.5 million.

Source: 3D Systems


3D Systems stock sell-off: additional reasons
In addition to missing analysts' estimates, there were surely two additional main reasons for 3D Systems stock dropping: organic growth and gross margin.

In my earnings preview for 3D Systems, I listed these as the top two metrics beyond the headliner revenue and earnings numbers for investors to focus on. Given both fell considerably short of their levels from the year-ago quarter, 3D Systems stock sell-off was hardly a surprise.

Organic growth (growth in businesses owned for at least one year) came in at 10% -- a big drop from the 30% in the second quarter of 2013, and surely well below what investors were expecting. This is an especially important metric for 3D Systems, given that the company has largely fueled its growth with many acquisitions. There appeared to be some legitimate reasons why organic growth was down. For one, there was a delay in some new product launches.

3D Systems' gross margin for the second quarter was 47.8%, down from 52.1% in the second quarter of 2013. This marked the second consecutive quarter where gross margin has decreased. Again, there seemed good reasons for at least part of this drop. As per 3D Systems' earnings release:

Gross profit margin shouldered the transitional effects of concentrated new product launches as well as the absorption of legacy products obsolescence and manufacturing expansion costs.

The good news is that the delayed product launches, as well as the demand for direct metal printers that once again outstripped the company's production capacity, should help 3D Systems' third-quarter results. The company closed the second quarter with a record backlog of $31.9 million, including $23.1 million of printer orders.

Looking forward
3D Systems inched up its revenue guidance by $5 million on both ends of its range to $700 million-$740 million. It maintained its earnings guidance, and expects GAAP earnings per share to be in the range of $0.44 to $0.56 and non-GAAP EPS to be in the range of $0.73 to $0.85. The analysts' consensus for revenue of $713.8 million falls near the lower end of the company's revenue range, while analysts are expecting adjusted EPS of $0.81, closer to the high end of the range.

The second half of the year will likely be make or break for some investors' confidence in 3D Systems. That's because management has been saying over the past couple quarters that the second half will be much stronger than the first.

An omen for the 3-D printing stocks?
3D Systems is often considered a bellwether for the 3-D printing stocks, given it's the largest and most diversified among the group. It also is typically the second in the sector to report, following much smaller, and very specialized Arcam.

So, perhaps not surprisingly, all the other 3-D printing stocks were also down on Thursday. Shares of fellow first-mover and industry bigwig Stratasys fell 4.2%. Industrial-focused ExOne plummeted 11.8%, industrial metals specialist Arcam dropped 3.7%, voxeljet plunged 9.4%, and newly public Materialise was down 5.5%. But the fact that the S&P 500 had its worst single day performance -- down 2% -- since April surely added to the magnitude of the 3-D printing stocks' sell-off.

3D Systems' revenue and earnings misses seem more company-specific, rather than industry-related. So, investors in the space shouldn't let the company's results color their current opinions of the other 3-D printing stocks.

Given 2014 has been a tough year for the 3-D printing stocks -- which are down anywhere from 25% through 54% -- investors could use some good news when Stratasys reports second quarter results on Aug. 7.