Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: After releasing preliminary first-quarter earnings results significantly below expectations after the close of the market Tuesday, shares of Stratasys (NASDAQ:SSYS) are falling in pre-market trading today.
So what: For the first quarter, Stratasys expects to generate between $171 million and $173 million in revenue, translating to a GAAP earnings loss of $3.40 to $4.09 per share, or a net profit of $0.02 to $0.04 per share on a non-GAAP basis. Prior to the release, the Wall Street community anticipated that Stratasys would generate $198.8 million in revenue and turn a non-GAAP profit of $0.40 per share.
Stratasys cited several reasons for the shortfall, including an $8.7 million negative impact to revenues brought on by the strengthening U.S. dollar, lower-than-expected operating performance across most geographies, weakness in North America in terms of capital spending, and slow adoption of recent product introductions.
Consequently, Stratasys reduced its full-year guidance, and now expects to generate between $800 million and $860 million in revenue, and earn between $1.20 and $1.70 per share on a non-GAAP basis. This updated estimate falls significantly below Wall Street expectations, calling for Stratasys to generate $937.9 million in revenue and earn $2.10 per share.
Beyond citing reasons for its shortfall, there were two other notable developments within the release. First, Stratasys has significantly reduced its capital expenditure plan for 2015. The company now expects to invest between $80 million and $110 million, instead of the $160 million to $200 million it had originally earmarked for capital expenditures for the year.
Second, Stratasys' MakerBot unit continued to underperform management's expectations and has forced the company to take a second goodwill impairment charge to the tune of $150 million to $200 million. Taking the midpoint of $175 million, Stratasys has written off a total $277 million of a $403 million investment, indicating that the company significantly overpaid for the asset, and essentially lost $277 million that could have been used for other parts of the business.
Now what: Although there was a lot of bad news for investors to digest in Stratasys' preliminary earnings, investors will get more clarity on the matter when the company hosts its first-quarter conference call on May 11 before the market opens. Investors may want to consider delaying taking action until the complete story is available.