Markets

Stratasys Earnings: What to Watch

Stratasys (NASDAQ: SSYS) is slated to report its third-quarter 2020 results before the market open on Thursday, Nov. 12. Its conference call with analysts is scheduled to follow at 8:30 a.m. EDT.

Investors will likely be approaching the 3D printing company's report with relatively low expectations. Last quarter, it missed Wall Street's expectations for revenue, but exceeded the consensus estimate for the bottom line.

The coronavirus pandemic hurt Stratasys' first- and second-quarter results, largely because many of its industrial sector customers were temporarily closed to slow the spread of the virus. But along with rival 3D Systems (NYSE: DDD), Stratasys had been struggling to grow revenue for some time before the global crisis began. (3D Systems is scheduled to report its Q3 results on Nov. 5.)

In 2020, Stratasys stock is down 23.1% through Oct. 22, while the S&P 500 has returned 8.5%.

Here's what to watch in Stratasys' Q3 report.

An industrial 3D printer printing a red plastic object.

A 3D printer at work. Image source: Getty Images.

Key numbers

Here are the company's results from the year-ago period and Wall Street's consensus estimates to use as benchmarks.

Metric

Q3 2019 Result

Wall Street's Q3 2020 Consensus Estimate Wall Street's Projected Change YOY

Revenue

$157.5 million

$121.7 million

(23%)

Adjusted earnings per share (loss)

$0.12

($0.06)

Result expected to flip to negative from positive.

Data sources: Stratasys and Yahoo! Finance. YOY = year over year.

As a point of comparison, Wall Street is projecting that 3D Systems' third-quarter revenue will decline 26% year over year, and that its adjusted loss per share will widen 100% to $0.08.

For additional context, in the second quarter, Stratasys' revenue fell 28% year over year to $117.6 million. Adjusted for one-time items, it posted a loss per share of $0.13, down from earnings per share of $0.16 in the year-ago period.

3D printer and material sales

Along with the headline numbers, investors should continue to focus on sales of 3D printers and print materials. This data reflects how well the company's razor-and-blade business strategy is working. Sales of 3D printers (the "razors") are ultra-important because they drive sales of print materials (the "blades"), which have high profit margins.

In other words, 3D printer sales are a leading indicator of sorts. We likely need to see an improvement in machine sales before we'll see a notable and sustainable improvement in the bottom line. Granted, Stratasys has been doing a very good job cutting costs, which helps bottom-line performance, but cost-cutting to drive earnings growth (or limit net losses, as is the case here) is not sustainable over the long term.

Last quarter, Stratasys' 3D printer revenue dropped 36% year over year, and print materials revenue fell 31%.

Again, Stratasys is scheduled to report its Q3 results before the market open on Thursday, Nov. 12.

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Beth McKenna has no position in any of the stocks mentioned. The Motley Fool recommends 3D Systems. The Motley Fool has a disclosure policy.

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

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