It has been about a month since the last earnings report for 3D Systems (DDD). Shares have added about 6.7% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is 3D Systems due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
3D Systems Q1 Results
3D Systems reported narrower-than-expected loss for the first quarter of 2020. For the first quarter, the company reported non-GAAP loss per share of 4 cents, which compares favorably with the Zacks Consensus Estimate of loss of 5 cents.
Moreover, the quarterly loss came in narrower than the year-ago quarter’s loss of 9 cents. Negative impact from lower revenues was more than offset by the company’s cost reductions. The company’s efforts to simplify its cost structure by lowering headcount, and trimming cost of sales and operating expenses were positives.
Despite improved bottom-line results, shares of 3D Systems depreciated nearly 5% in the extended trading session as the coronavirus-led global economic and business disruptions hurt first-quarter top-line results.
The company’s first-quarter revenues declined 11.4% year over year to $134.7 million and missed the Zacks Consensus Estimate of $140 million. Decline in manufacturing activity and industrial production, which resulted in overall fall in customer demand, affected the business.
The company stated that due to the coronavirus crisis, CapEx spending is down across majority of the industries, including aerospace and automotive, thwarting overall demand for new hardware and associated software licenses. Moreover, delayed or cancellation of elective surgeries, including dental, have slowed consumption.
Furthermore, supply-chain disruptions caused by the coronavirus-led lockdown marred productions across its facilities in China. In Europe too, the company operated facilities with limited productions.
3D Systems reported year-over-year declines across all its segments. Material revenues edged down 0.1% to $41.4 million in the March-end quarter.
The Printer division revenues plunged 35.5% to $19.3 million due to a soft macro-industrial environment, timing of large enterprise customer orders, and delay in factory metals printing shipments.
3D Systems’ Healthcare segment revenues fell 7.3% to $46.3 million.
The company’s On Demand revenues were down 12.8% to $19.7 million.
Software revenues slipped 7.7% year over year to $21.2 million.
Profits and Margins
In the reported quarter, non-GAAP gross profit declined 12.7% year over year to $58 million, while margin shrunk 110 basis points to 43.1%. This decrease was primarily due to lower revenues and factory utilization.
In the first quarter, the company’s non-GAAP operating expenses dropped 13.6% to $63 million. This year-over-year decline was chiefly due to the company’s sustained focus on lowering cost structure, and the favorable timing of customer-funded research and development. Non-GAAP SG&A costs were down 13.9% and non-GAAP R&D expense slid 12.8%.
Cash Flow and Balance Sheet
3D Systems ended the quarter with cash and cash equivalents of $112.8 million compared with the $133.7 million recorded at the end of prior quarter. The company used $2.3 million of cash for operational activities during the first quarter.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted -59.68% due to these changes.
At this time, 3D Systems has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, 3D Systems has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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