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Stratasys' Solid Q1 Profit Extends 3D Printer Rally

Stratasys (SSYS) didn't blow out first-quarter results Monday, but 3D printer stocks rallied as investors cheered the latest evidence that the much-hyped technology continues to grow in popularity.

The Minneapolis-based company earned 43 cents a share excluding various items, up 34% vs. a year earlier. Wall Street expected 38 cents. It was the 11th straight quarter of double-digit growth.

Revenue rose 118% to $98 million, fueled by recent acquisitions. That was roughly in line or slightly below analysts' consensus.

Stratasys shares fell early but rallied for a 2% gain to 85.34, the best close since late January.

"Everything Stratasys reported was a step in the right direction," said Daniel Holland, analyst with Morningstar. "It's not overwhelmingly positive or negative but is consistent with what you would expect of the industry at this stage.

Meanwhile, 3D Systems (DDD) shot up 7.5% Monday to 47.15 a closing high Monday. On April 30 it reported a 24% EPS gain that just met estimates. But its shares have spiked 32% since then, even with last week's stock offering.

ExOne (XONE) rose 6% to 44.55, a fresh high. The smaller peer reports Q1 earnings late Tuesday.

Something Old, New

The 3D printing industry itself is both old and new. The technology has been used for more than 25 years. But costs have come down sharply in recent years. It was only in the past year that 3D tech began to receive widespread media attention.

"This interest has been driven in part by the mainstream media and their expanding coverage of our industry," said Stratasys CEO David Reis in the post-earnings conference call with analysts.

Reis said Stratasys began a significant branding campaign in Q1 "to raise awareness of the new Stratasys," referring to its acquisition of Israel-based Objet for $1.4 billion in April 2012, which closed last December.

"Our ultimate goal is to make Stratasys synonymous with 3D printing," Reis said.

3D printers use liquid or powder materials and other chemical agents to print products by repeatedly depositing thin layers of materials bonded together. It is used in aerospace, auto, medical and consumer product fields, among other industries.

The market will be $8.4 billion in 2025, up from $77 million in 2012, according to Lux Research.

Stratasys and 3D Systems primarily focus on printing parts made of plastics. ExOne largely prints with a wide range of metals.

Heavy R&D

In March Stratasys announced a new 3D printer aimed at dental applications. The OrthoDesk is designed for smaller orthodontic labs and clinics.

"We have identified the dental market as an attractive vertical that we will target through innovative products and channel development strategies," Reis said in the call.

Stratasys said it invested $10 million on research and development in Q1.

"An R&D investment of even 5% would be significant, so it's clear that Stratasys is investing very heavily to create products," Holland said.

It's also necessary if the 3D printing industry wants to keep growing at a pace that meets heightened expectations. Since the start of 2012, Stratasys shares are up 181%. 3D Systems has soared 391% in that period.

ExOne came public in early February, but it's no laggard. The stock shot up 47% in its trading debut and has risen 147.5% from the $18 IPO price.