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Stratasys (SSYS) Up 7.7% Since Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Stratasys, Ltd. SSYS. Shares have added about 7.7% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is SSYS 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 catalysts.

Stratasys Q4 Earnings In Line, Revenues Top Estimates

Stratasys reported mixed results for fourth-quarter 2017, wherein earnings matched the Zacks Consensus Estimate while revenues surpassed the same. Both the metrics improved year over year.

In the quarter under review, the company’s non-GAAP earnings per share came in at 16 cents, which increased 6.7% on a year-over-year basis.

Quarter Details

Stratasys’ revenues of $179.3 million outpaced the Zacks Consensus Estimate of $174 million. Also, on a year-over-year basis, the figure rose 2.3%.

Segment wise, Product revenues were up 2.5% from the year-ago quarter to $129.8 million mainly owing to the rise in system revenues. The company stated that the system revenues were driven by the increased demand for “professional rapid prototyping application” oriented F123 Series, the company’s “new J700 Dental Solution” and its “H2000 Large Part FDM 3D Production System”.

Revenues from Services increased 2% year over year to $49.6 million. The upswing can be primarily attributable to 7% growth in customer support revenues mainly driven by growth in the installed base of systems and enhancement of service contract attached rate.

Stratasys’ non-GAAP gross margin contracted 110 basis points (bps) to 52.5%, primarily due to product mix.

The company’s non-GAAP operating expenses decreased 2.3% year over year to $80.6 million. Also, as a percentage of revenues, non-GAAP operating expenses were down year over year from 47% to 44.9%.

Non-GAAP operating income totaled $13.5 million compared with $11.6 million in the year-ago quarter. Operating margins came in at 7.6% compared with 6.6% in the prior-year quarter.

The company exited the quarter with cash and cash equivalents of $328.8 million compared with $302.8 million at the end of the previous quarter. Inventories came in at approximately $115.7 million than $124.1 million last quarter. As of Dec 31, 2017, long-term debt came in at $27.1 million.

Full-Year 2017 Details

For full-year 2017, Stratasys reported revenues of $668.4 million showcasing a decline of 0.6% from the previous year. However earnings surged 60.7% to 45 cents per share as compared to full year 2016.

Guidance

Stratasys issued guidance for full year 2018. The company envisions revenues in the range of $670-$700 million. Non-GAAP earnings per share are now projected between 30 cents and 50 cents.

Furthermore, the company anticipates non-GAAP operating margin to be in the 4.5-6% band. Capital expenditures are estimated to lie within in the $40-$50 million range.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. There have been two revisions lower for the current quarter. Last month, the consensus estimate has shifted downward by 111.1% due to these changes.

Stratasys, Ltd. Price and Consensus

 

Stratasys, Ltd. Price and Consensus | Stratasys, Ltd. Quote

VGM Scores

Currently, SSYS has a subpar Growth Score of D, however its Momentum is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate that the stock is more suitable for momentum investors than value investors.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. It's no surprise SSYS has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.


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