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Stratasys Posts Solid Q2 Earnings - Analyst Blog

By: Zacks.com
Posted: 8/12/2013 10:35:00 AM
Referenced Stocks: APELY;DDD;EFII;SSYS

Stratasys Inc. ( SSYS ) reported second-quarter 2013 earnings per share of 36 cents, beating the Zacks Consensus Estimate of a loss of 5 cents.

Revenues

Stratasys recorded total revenue of $106.5 million, up 115.5% from $49.4 million in the year-ago quarter. The company witnessed improvements in the revenues of both Products and Services, which resulted from higher product and services demand, and various team integration and cross-selling activities.

In the reported quarter, Product revenues grew significantly by 117.7% from the year-ago quarter on higher systems sales and demand for consumables. Apart from this, Services revenues increased 104.4%, attributable to an increase in revenues from maintenance contracts and services, reflecting the company's growing base of installed systems.

Geographically, North America and Asia-Pacific played a vital role, while Europe, Middle East and Africa continued to lag.

Operating Results

Gross profit stood at $50.4 million (47.3% of the total revenue) in the quarter, up 92.7% from $26.2 million (52.9% of the total revenue) in the year-ago quarter.

Operating loss in the quarter was $2.6 million versus a profit of $5.8 million in the year-ago quarter. Operating expenses increased 150.1% year over year, primarily due to higher research and development (R&D) and selling, general and administrative (SG&A) expenses. Operating loss margin was 2.4% compared to operating profit margin of 11.7% in the year-ago quarter.

The company reported net loss of $2.8 million or 7 cents per share compared to a profit of $3.0 million or 14 cents per share in the prior-year quarter. Excluding one-time items but including non-cash stock-based compensation expenses, adjusted earnings were 36 cents per share.

Balance Sheet

The company exited the quarter with cash and cash equivalents of $148.9 million, up from $65.5 million in the previous quarter. Inventories for the quarter stood at $64.6 million, down from $66.4 million reported in the previous quarter. The company does not have any long-term debt.

Fiscal 2013 Guidance Revised

The company revised its fiscal 2013 guidance to reflect the impact of the pending acquisition of desktop 3D printing company, MakerBot (announced in Jun 2013).

The company provided its guidance for fiscal 2013, wherein revenues are expected in the range of $455.0 million to $480.0 million (previously $430.0 million to $445.0 million), while the non-GAAP earnings are anticipated to be $1.75 to $1.90 per share (previously $1.80 to $1.95 per share). Moreover, GAAP loss is expected in the range of 76 cents - 49 cents per share (previously 41 cents - 16 cents per share).

MakerBot, though dilutive to fiscal 2013 earnings, will be accretive to non-GAAP earnings per share in fiscal 2014, the company states.

Conclusion

The second-quarter results were encouraging with adjusted earnings per share exceeding the Zacks Consensus Estimate and revenues improving on a year-over-year basis. Continuous investments (acquisitions, integration activities and cross-selling initiatives) led to higher operating expenses and eventually to an operating loss.

We are a little apprehensive as the company is unable to control its operating expenses and cost of sales. Moreover, it is facing stiff competition from big and small players like 3D Systems Corp. ( DDD ). But we are optimistic that the investments will continue to pay off and support growth.

Stratasys carries a Zacks Rank #3 (Hold). Other stocks such as Electronic For Imaging Inc. ( EFII ) and Alps Electric Co. Ltd. ( APELY ), both carrying a Zacks Rank #1 (Strong Buy), might be worth considering at this point.



ALPS ELECTRIC (APELY): Get Free Report

3D SYSTEMS CORP (DDD): Free Stock Analysis Report

ELECTRN IMAGING (EFII): Free Stock Analysis Report

STRATASYS LTD (SSYS): Free Stock Analysis Report

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