3D Systems Corp.
(
DDD
) reported impressive third quarter results last week, including a
positive earnings surprise of 15.4% and a raised fiscal year 2012
guidance. This Zacks #2 Rank (Buy) 3D printers company has beaten
the Zacks Consensus Estimate in 3 out of the last 4 quarters with a
positive surprise of 34.4%, and has a long-term projected growth
rate of 17.6%.
Impressive 3Q for 3D
On October 25, 3D Systems reported third quarter earnings per share
that jumped 82.6% year over year to 30 cents, primarily on the back
of better-than-expected revenue growth and strong margin expansion.
Revenue surged 57.3% from the year-ago quarter to $90.5 million,
driven by a 79.1% surge in product sales and a 27.5% growth in
services.
The operating margin expanded 510 basis points ("bps") in the
reported quarter, primarily due to a 160 bps contraction in
operating expenses as a percentage of revenue, as well as a higher
gross margin base (up 350 bps).
3D Systems ended the quarter with a cash balance of $184.0 million.
Acquisitions
Acquisitions have been an integral part of 3D Systems' growth
story. Most recently, it announced back-to-back acquisitions of the
Netherlands-based The Innovative Modelmakers B.V. and South
Korea-based INUS Technology Inc. (developer of Rapidform). In the
recently-concluded third quarter, the company acquired Viztu
Technologies, Inc., a developer of online platform Hypr3D.
Outlook Revised Upward
3D Systems raised its fiscal year outlook and now expects revenue
between $345.0 million and $365.0 million, versus the prior
guidance of $330.0 million to $360.0 million. Earnings are
projected at $1.20 to $1.30 per share, instead of $1.00 - $1.25.
At the beginning of the fourth quarter, the company had a strong
backlog of $9.3 million.
Earnings Momentum Moves Higher
The Zacks Consensus Estimate for 2012 is at $1.08 per share, which
is up nearly 6% in the past 7 days. For 2013, the Zacks Consensus
Estimate has climbed 2.3% to $1.32 over the last 30 days,
reflecting 29.0% earnings growth.
Reasonable Valuation
Currently, 3D Systems is trading at a significant premium to most
of its peers on a forward P/E basis. However, its strong earnings
growth expectation of 17.6% over the next five years compares
favorably with the peer group average of 9.3%, indicating room for
further significant expansion. Moreover, its PEG ratio of 2.3 is
lower than the peer group average of 2.7.
Historically, share prices have shown positive correlation to
earnings growth. The uptrend in the 2012 earnings estimate should
encourage investors as the stock is likely to follow the trend.
3D Systems Corp manufactures 3D printers, print materials and
custom parts to its customers. The company also develops creative
content development and design productivity tools. The company
operates in North America, Europe and the Asia-pacific region. In
fiscal year 2011, international operations contributed 49% of the
total revenue.
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