3D Systems Posts Striking Q4 Earnings Beat, Shares Soar

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3D Systems Corporation DDD jumped back on the earnings beat track after posting terrible misses in the two trailing quarters. The company reported adjusted earnings of 16 cents for fourth-quarter 2015, which was way ahead of the Zacks Consensus Estimate of 3 cents.

Shares were up over 15% in pre-market trading , as investors cheered the upbeat results.

However, the company posted a GAAP loss of $5.32 per share, in contrast with earnings of 1 penny in the year-ago quarter. Strained revenue growth, coupled with significant non-cash goodwill and intangibles impairment charges dragged the company's bottom line.

For the full year 2015, the company reported a GAAP loss of $5.85 per share.

Inside the Headlines

The 3D printer maker reported revenues of $183.4 million, reflecting a year-over-year decrease of 2.2%. A continued challenging operating environment and lower revenue from 3D printing products restricted top line growth. However, revenues surpassed the Zacks Consensus Estimate of $178 million.

For the full year 2015, revenues rose 1.9% over the previous year to $666.2 million.

Gross margin (excluding charges related to inventory and purchase commitment) for the fourth quarter dipped 20 basis points on a year-over-year basis to 47.7%. Also, the company's selling and administrative expense was up 5.6% to $66.5 million, while research and development expenses fell marginally to $22.4 million.

Despite challenging growth conditions, 3D Systems continues to focus on expansion of market share through strategic partnerships. The quarter saw 3D Systems partner with two major healthcare companies to expand its Simbionix training product line for women. The move will strengthen its competitive position in the healthcare market and boost results.

The company also expanded its portfolio with the launch of a new cardiovascular anatomical model product line to help medical professionals improve cardiology training and surgical planning routines.

In addition, the company is committed to channelize its resources toward more profitable markets. During the quarter, 3D Systems announced its decision to cease the production of Cube, the entry-level consumer 3D printer. Although it might hurt revenues in the short term, we believe that it will direct the company's resources toward higher-margin products and thus enhance profitability in the long run.

Cash Flow and Balance Sheet

3D Systems ended the quarter with cash and cash equivalents of $155.6 million, down from $284.9 million as on Dec 31, 2014. As of Dec 31, 2015, cash utilized in operating activities was $3.1 million compared with a cash flow from operating activities of $51.1 million as of Dec 31, 2014.

To Conclude

Over the past few quarters, 3D Systems has been experiencing unfavorable broader market conditions that have badly hit its financial performance. The company is grappling with strong volatility in macroeconomic factors such as economic slowdown, inflation, currency fluctuations, commodity prices and credit availability. These conditions continue to impact the company's performance negatively.

However, the company is taking initiatives to channelize its resources into more lucrative areas in professional and industrial markets. 3D Systems also conducted numerous successful product launches and strategic deals, which could help the company combat these persistent challenges in the near future.

3D Systems presently carries a Zacks Rank #4 (Sell). Better-ranked stocks in the broader sector are Activision Blizzard, Inc. ATVI , Teijin Ltd. TINLY and Johnson Outdoors Inc. JOUT . All these stocks sport a Zacks Rank #1 (Strong Buy).

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JOHNSON OUTDOOR (JOUT): Free Stock Analysis Report

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

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Business , Investing , Earnings , Stocks
Referenced Symbols: JOUT , TINLY , ATVI , DDD

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