A month has gone by since the last earnings report for Stratasys (SSYS). Shares have lost about 5.5% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Stratasys due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Stratasys Reports Q1 Results
Stratasys reported first-quarter 2019 earnings of 10 cents per share, which surpassed the Zacks Consensus Estimate of 7 cents. The bottom line was higher than the year-ago figure of 5 cents.
Stratasys’ revenues of $155.3 million matched the consensus estimate and surpassed the year-ago figure by 1%.
Continued strength in sales of high-end system and materials for PolyJet and FDM technology platforms, especially in North America aided the top line. Strong customer interest in its new products was also a positive.
However, Stratasys faced foreign exchange fluctuations, which led to currency headwinds worth $3 million, thus affecting the top line.
Segment wise, Products revenues rose 1% from the year-ago quarter to $105.1 million. This figure was up 4%, excluding divested entities.
Within Products revenues, System revenues increased 1%. Taking divestitures into account, the figure increased 4%. Consumables revenues increased 1% year over year but were up 3% excluding divestitures, driven by strength in demand in the United States.
Revenues from Services increased 1% year over year to $50.2 million. The rise was primarily attributed to 1% growth in customer support.
Stratasys’ F123 printers, particularly the Elastomer TPU material-enabled edition, gained significant traction in the U.S. market.
The company continued to witness increased adoption of target verticals of aerospace, automotive, healthcare and dental. Moreover, momentum in demand for the F380 Carbon Fiber Edition of the F123 Printer was also encouraging.
Stratasys also commenced shipping of the new MakerBot Method at the end of the first quarter, after witnessing strong pre-order demand.
Stratasys’ non-GAAP gross profit decreased 0.6% from the year-ago quarter to $80.7 million. Non-GAAP gross margin contracted 80 basis points (bps) to 52% due to a mix in revenue sources.
Non-GAAP operating income totaled $6.8 million, up 38.8% from the year-ago quarter. Operating margin expanded 120 bps to 4.4%.
Balance Sheet and Cash Flow
The company exited the quarter with cash and cash equivalents of $367.8 million compared with $393.2 million at the end of the previous quarter.
As of Mar 31, 2019, there was no long-term debt compared with $22 million at the end of the prior quarter.
Net cash provided by operating activities in the quarter was $4.6 million.
For full-year 2019, the company reiterated its guidance. Revenues are expected in the range of $670-$700 million.
Non-GAAP earnings per share for the full year are expected between 55 cents and 70 cents.
Non-GAAP operating margin is projected to be in the 5.5-6.5% band.
Capital expenditures are estimated to lie within $45-$60 million.
Management is optimistic about its product lineup, which is expected to expand its addressable markets, resulting in accelerated growth from 2020.
Management expects continued demand for high-end PolyJet solutions from industries, including consumer-packaged goods and medical segments.
Additionally, management is optimistic about upcoming innovations in FDM and PolyJet portfolios.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -12.9% due to these changes.
Currently, Stratasys has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% 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.
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Stratasys has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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