Diversified 3D printing company 3D Systems (NYSE: DDD) is slated to report its first-quarter 2018 earnings after the market closes on Wednesday, May 2. As with last quarter, main rival Stratasys is scheduled to report on the same day, though before the market opens.
Shares of 3D Systems are up more than 34% so far in 2018 through April 20, but are in the red 24% for the one-year period through this same date. For context, the S&P 500 is flat for 2018 and has returned 16.5% over the last year, while Stratasys stock has gained 7.8% this year and is down 10% over the one-year period.
Image source: Getty Images.
Here are the year-ago quarter's results to use as benchmarks.
Q1 2017 Result
Adjusted earnings per share (EPS)
Data source: 3D Systems.
While long-term investors shouldn't place too much importance on Wall Street's near-term estimates, they can be helpful to know as they often help explain market reactions. Analysts expect 3D Systems to deliver adjusted EPS of $0.01 on revenue of $159.6 million, representing a decline of 83% and an increase of 2%, respectively, over the year-ago period.
For some perspective, in 2017, 3D Systems' revenue edged up 2% year over year to $646.1 million. Its loss on the basis of generally accepted accounting principles (GAAP) widened to $0.59 per share from $0.35 per share in 2016, while it posted a loss of $0.02 per share on an adjusted basis, versus earnings of $0.46 per share in the prior year's period. The poor showing on the earnings front was largely due to the third-quarter results, as the company took a $12.9 million inventory writedown associated with legacy products and parts, experienced execution issues in certain regions, and encountered pricing pressures in select businesses.
Investors will be able to get a clearer picture of 3D Systems' organic revenue growth this year. In the first quarter of 2017, the company acquired a maker of dental materials, which gave its results a boost last year compared to 2016.
Along with the headline numbers, here's what to focus on in the report.
3D printer sales
Last quarter, 3D printer revenue was approximately flat with the year-ago quarter. While far from ideal, it was an encouraging sign, as this metric has steadily declined since 2015. One quarter doesn't make a trend, but a second consecutive quarter of 3D printer revenue growth that is flat (or positive) year over year would suggests this metric has bottomed.
3D printer sales accounted for 20% of 3D Systems' total revenue in the fourth quarter of 2017, but this business is far more important than this percentage suggests. That's because sales of 3D printers drive sales of high-margin print materials in the company's razor-and-blade-like business model.
Figure 4 sales outlook
Investors should expect management to provide some color regarding its outlook for Figure 4 sales. (Figure 4 is a robotic, scalable, stereolithography (SLA) 3D printing system designed for the production of small plastic parts. The company claims this tech is significantly speedier than its conventional SLA technology.)
Last year, management heavily touted Figure 4, with CEO Vyomesh Joshi saying the company expects this system to be a "significant" catalyst for growth in 2018. We'll be four months into the year when 3D Systems releases its earnings and holds its conference call, so if management doesn't share any material news on the Figure 4 front, it's probably safe to assume that progress selling these systems isn't going as well as the company had projected.
Investors might not be able to count on 3D Systems providing official 2018 guidance, but let's hope management provides some color regarding this topic. As background, the company didn't release 2018 guidance last quarter, as is customary. This didn't come as much surprise because 3D Systems withdrew its 2017 guidance when it released third-quarter earnings, citing the unpredictability surrounding its legacy product quality and reliability issues.
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