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3D Systems Signals Renewed Revenue, Earnings Growth

David Silver, CFA, CPA

Leading 3-D printer 3D Systems’ (DDD) fourth-quarter profit reflected stronger efficiency and expense control that offset a sales decline. Management continues to sharpen its strategic focus amid sluggish industrial demand and significant ongoing uncertainty tied to anticipated new product introductions. CEO and former senior Hewlett Packard executive Vyomesh Joshi articulated his longer-term strategic priorities, including a clear shift in end-market emphasis from prototyping to production, a customer–focused operating model, and attaining operational excellence.

We maintained our fair value estimate of $16, a still-modest valuation that reflects mainly signs of revenue stability and greater clarity for cash expenses and operating cash flow. The firm is making steady headway in certain high-value sectors, including the broader healthcare vertical and in direct metal parts printing. It also continues to commercialize new printers, materials, and related products--steps we deem essential to maintain competitiveness in a fast-evolving industry.

Management resumed providing financial guidance, a first since well before Joshi became CEO. Revenue guidance for 2017 of $643 million-$684 million suggests full-year growth of between 2% and 8%, while adjusted EPS guidance of $0.51-$0.55 compares with $0.46 in 2016. We forecast 3% revenue growth in 2017 to $650 million, mainly due to soft printer sales created by the approaching launch of HP's Multi Jet Fusion printers. We forecast mid-to-high single-digit growth in materials and software demand plus slightly higher Quickparts (on-demand parts) sales.

Quarterly results included signs of enhanced focus and efficiency, if not broad-based growth. Revenues of $166 million declined 10% year over year and rose 6% sequentially. Printer sales fell 21% (including lower professional and now-discontinued consumer sales), and on-demand parts sales fell 18%. Sales of high-margin consumables and software rose 4% and 12%, respectively.

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