It has been about a month since the last earnings report for 3D Systems (DDD). Shares have added about 12.7% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is 3D Systems due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
3D Systems’ Q3 Loss Narrower Than Expected, Sales Miss
3D Systems reported a third-quarter 2022 non-GAAP loss of 5 cents per share, narrower than the Zacks Consensus Estimate of a loss of 9 cents. The bottom line compared unfavorably with the prior-year quarter’s earnings of 8 cents per share.
In the third quarter of 2022, 3D Systems reported revenues of $132.3 million, down 15.3% from the year-ago quarter and 5.5% from the previous quarter. Excluding the impact of business divestments in 2022 and on a constant currency basis, revenues increased 2.7% year over year. The top line lagged the consensus mark of $137.4 million for the third consecutive quarter.
3D Systems’ third-quarter performance reflected impacts of inflationary pressure, foreign exchange risks and supply chain disruptions, among other ongoing macroeconomic constraints.
Shares of DDD have slumped 73.3% in the past year.
Quarter in Detail
In the third quarter, product revenues represented 72.8% of the total revenues and decreased 11.6% to $96.3 million. Revenues from Services, which accounted for 27.1% of revenues, plunged 23.9% year over year to $35.9 million.
Revenues from the Healthcare segment fell 16% year over year to $64.2 million. The figure decreased 10.5% from the prior quarter. Excluding the impact of business divestments, the segment’s revenues decreased 3.5% year over year.
The Industrial Division revenues decreased 14.6% year over year to $68.1 million and 0.3% sequentially. Excluding the impact of business divestments, the unit’s revenues increased 9%. The company witnessed solid demand for products, as well as materials.
During the third quarter of 2022, 3D Systems’ non-GAAP gross profit decreased 4.5% year over year to $52.8 million. Consequently, the non-GAAP gross profit margin contracted 60 basis points (bps) to 39.9%. This decrease was driven by year-over-year product mix changes, due to divestitures and increased supply chain disruptions.
Non-GAAP operating expenses increased 18.3% to $58.3 million. The increase was due to spending related to future growth, which includes expenses from acquisitions, research and development, and corporate infrastructure.
Non-GAAP operating loss was $5.5 million compared with the year-ago operating income of $6 million.
Adjusted EBITDA was negative $0.3 million. The margin of negative 0.2% reflected the inflationary impact on input costs and gradual investments for portfolio & business growth.
Balance Sheet Details
The company exited the third quarter with cash, cash equivalents and short-term investments of $609.4 million, lower than the prior quarter's $638.2 million. As of Sep 30, 2022, 3D Systems had a total debt of $448.9 million, slightly up from the previous quarter’s $448.1 million.
In the first nine months of 2022, the company utilized $52.4 million of cash from operational activities.
3D Systems trimmed its full-year 2022 guidance for the third time. The company now expects revenues between $535 million and $545 million compared with the previously expected band of $530-$570 million. The company still projects non-GAAP gross margin to be 39-41%.
Non-GAAP operating expense is estimated to be $240-$245 million, decreasing the lower end from the earlier projection of $245-$250 million.
Management provided this guidance with the assumption that the pandemic, supply chain disruptions or any geopolitical events will not be of any concern in 2022.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
The consensus estimate has shifted -31.76% due to these changes.
At this time, 3D Systems has an average Growth Score of C, a grade with the same score on the momentum front. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise 3D Systems has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
Performance of an Industry Player
3D Systems belongs to the Zacks Computer - Mini computers industry. Another stock from the same industry, Apple (AAPL), has gained 4.5% over the past month. More than a month has passed since the company reported results for the quarter ended September 2022.
Apple reported revenues of $90.15 billion in the last reported quarter, representing a year-over-year change of +8.1%. EPS of $1.29 for the same period compares with $1.24 a year ago.
For the current quarter, Apple is expected to post earnings of $1.97 per share, indicating a change of -6.2% from the year-ago quarter. The Zacks Consensus Estimate has changed -4.1% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Apple. Also, the stock has a VGM Score of D.
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