Bear of the Day: 3D Systems (DDD)

3D Systems Corp. (DDD) is a leading provider of 3-D Modeling, rapid prototyping and manufacturing solutions. Its systems and materials reduce the time and cost of designing products and facilitate direct and indirect manufacturing by creating actual parts directly from digital input. These solutions are used for design communication and prototyping well as for production of functional end-use parts.

Disappointing Q1 Results

Last month, 3D Systems reported earnings results for its fiscal 2019 first quarter, but shares of the 3D printer manufacturer plunged nearly 25% in the wake of the results.

On an adjusted basis, the loss per share grew to $0.09 per share from a loss of $0.03 per share in the year ago quarter; the bottom line also missed the Zacks Consensus Estimate. Revenues fell 8% year-over-year to $152 million and lagged behind our consensus estimate as well.

Even though the company reported 90% higher unit sales, printer revenue decreased 29% year-over-year. Additionally, materials revenue fell 3%, software decreased 8%, and on demand services decreased 12% compared to Q1 2018.

DDD was also hit hard by large orders placed at discounted prices, and the rougher-than-expected transition to metal printers in Q1.

Estimates Keep Falling

3D Systems Corporation Price and Consensus

3D Systems Corporation Price and Consensus

3D Systems Corporation price-consensus-chart | 3D Systems Corporation Quote

Analysts have since turned bearish on 3D Systems, with six cutting estimates in the last 60 days for the current fiscal year. Earnings are expected to plunge over 130% for the year, and the Zacks Consensus Estimate has dropped 22 cents during that same time period from $0.17 to -$0.05 per share.

This sentiment has stretched into 2020. Though earnings growth could bounce back into positive territory, our consensus estimate has dropped 14 cents in the past two months.

DDD is now a Zacks Rank #5 (Strong Sell).

Shares of the 3D printing company have fallen almost 20% since January compared to the S&P 500’s gain of 10%.

Bottom Line

3D Systems did not provide official guidance in its earnings release, though CFO John McMullen did say back on the Q4 2018 earnings call that the company anticipates “continued revenue growth, improved profitability, and cash generation" in 2019.

One bright spot to come out of DDD’s Q1 numbers was actually an analyst upgrade. Paul Coster at JPMorgan believes the worst might be over for the 3D printer, so he upgraded DDD to Neutral from Underweight; however, he said the company’s Q2 “may remain pressured” due to tough comps and a shift to lower priced printers.

Investors who are interested in adding computing peer should take a look at Stratasys (SSYS) or HP Inc. (HPQ). The two companies hold a Zacks Rank #3 (Hold) and #2 (Buy) and expect earnings growth of 19.2% and 7.4% for this fiscal year, respectively.

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