3D Systems Corp.
) crashed by more than 15% yesterday after the company announced
its preliminary earnings results for full-year 2013. The company
currently expects non-GAAP earnings of 83 cents-87 cents per
share, down from its previously guided range of 93 cents-$1.03
Management also narrowed its revenue guidance to $513
million-$514 million from its previously mentioned range of $500
million to $530 million. The company witnessed a surge in new
order wins and order backlogs are expected to have almost a
two-fold increase on a sequential basis in the quarter.
Although revenues are expected at nearly the mid-point of its
previously guided range, the news failed to cheer up the
investors as management had drastically lowered the earnings
outlook for the year.
The primary reason cited for lowered earnings guidance was a
significant increase in research and development (R&D)
expenditures along with a surge in sales and marketing expenses.
In Dec 2013, the company had made a couple of strategic
acquisitions, namely the 3D filament manufacturer Village
Plastics Co. for an undisclosed sum, and a division of
) for $32.5 million.
The integration costs of these acquisitions are also expected
to be a drag on the earnings guidance. Moreover, results are also
likely to be marred by the unfavorable product mix and sluggish
on-demand parts business of the company in this quarter.
3D Systems is aggressively pursuing R&D to maintain its
premier place in the 3D printing industry. The industry is highly
dependent on patented technologies which play an important role
in determining a company's performance. This Zacks Rank #3 (Hold)
stock is likely to face severe competition as some of its primary
patents are about to expire in 2014.
3D printing is a relatively new concept and is likely to take
time to gain popularity. In 2013,
), 3D Systems and
) generated returns of 45.4%, 115.1% and 114.4%, respectively.
However all three are on a downhill so far in 2014, with a
decline of 17.4%, 32.0% and 36.5%, year-to-date. Another
recently-listed 3D printing company,
), is also down 26.4% year-to-date.
The industry has been facing some tough times since January
owing to guidance cuts by some companies. Last month ExOne
lowered its fiscal 2013 revenue guidance and Stratasys slashed
its 2014 guidance fearing higher operating expenses from
incremental investments in sales and marketing as well as
However, 3D Systems intends to continue investing in R&D
for a sustainable long-term growth. The company expects that its
portfolio of new and innovative products will lead to more than
30% organic growth in the next couple of years, thereby enhancing
its margins and earnings, going forward.
The 3D printing market also presents a favorable long-term
opportunity as a large number of engineers, designers, architects
and entrepreneurs are opting for 3D solutions for their primary
designing and product modeling. Only time will tell whether such
investments will indeed bear fruit for 3D Systems.
3D SYSTEMS CORP (DDD): Free Stock Analysis
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