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Stratasys (SSYS) Q1 Earnings and Revenues Lag Estimates

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Stratasys Ltd. SSYS reported disappointing results for first-quarter 2018, wherein both the top and bottom-line figures fell short of the Zacks Consensus Estimate.

In the quarter under review, the company’s non-GAAP earnings per share came in at 5 cents, which missed the Zacks Consensus Estimate of 8 cents per share. The figure however, was in-line with the year-ago quarter’s earnings.

Quarter Details

Stratasys’ revenues of $153.8 million missed the Zacks Consensus Estimate of $167 million. Also, on a year-over-year basis, the figure declined 5.7%.

The decline in revenues was primarily due to disappointing decline in sales of high end products in North America. Sluggish demand from government and other key vertical customers like aerospace and automotive resulted in the lower-than-expected sales.

Segment wise, Product revenues were down 9.7% from the year-ago quarter to $103.9 million. Within product revenues, system revenues dropped 20.7% due to lower sales of high-end products in North America.

Revenues from Services increased 3.8% year over year to $49.9 million. The increase in Services revenues was primarily attributed to 7.3% year-over-year increase in support revenues that include revenues generated mainly through maintenance contracts. The growth in installed base of systems and improvement in service contract attach rate led to improved revenues.

Stratasys’ non-GAAP gross margin expanded 160 basis points (bps) to 52.8%.

Non-GAAP operating income totaled $4.9 million, compared with $4 million in the year-ago quarter. Operating margin was 3.2% compared with 2.5% in the prior-year quarter.

The company exited the quarter with cash and cash equivalents of $346.5 million compared with $328.8 million at the end of the previous quarter. Inventories came in at approximately $120.1 million compared with $115.7 million last quarter. As of Mar 31, 2017, long-term debt came in at $25.9 million.

Stratasys, Ltd. Price, Consensus and EPS Surprise

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

Guidance

Stratasys reiterated guidance for full-year 2018. The company envisions revenues in the range of $670-$700 million. The Zacks Consensus Estimate is pegged at $685.3 million. Non-GAAP earnings per share are projected between 30 cents and 50 cents. The Zacks Consensus Estimate is pegged at 41 cents.

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

Conclusion

Stratasys posted unimpressive results for first-quarter 2018 due to lower-than-expected sales of high-end products in North America. However, management stated that they are trying to address the underperformance of this particular section by working closely with channel partners.

The company’s operational performance was satisfactory in spite of lower revenues. Management is particularly optimistic about the long-term investments meant for the expansion of the addressable markets. Stratasys’ new hardware and software upgrades are also proving worthy for market expansion for both prototyping and manufacturing applications.

Management noted that more than half of the company’s systems are experiencing repeat sales, with existing customers placing larger orders, which is a positive. They also remain optimistic about the growing adoption of newer additive manufacturing technologies, improving customer relationships and deeper market penetration in its markets.

Zacks Rank and Stocks to Consider

Currently, Stratasys carries a Zacks Rank #3 (Hold).

Some of the better-ranked stocks in the broader technology sector are Micron Technology, Inc. MU, Twitter, Inc. TWTR and Lam Research Corporation LRCX, all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term EPS growth rate for Micron and Lam Research is projected to be 10%, 17.7% and 23.1% respectively.

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