3D Systems Corp. (DDD) is set to report first-quarter 2014 results on Apr 29. Last quarter, it posted a negative surprise of 27.27%. Let's see how things are shaping up for this announcement.
Growth Factors in the Past Quarter
3D Systems, the bellwether in 3D printing industry, had been on a downhill since the beginning of this year, owing to the prevalent sluggishness in the industry. Moreover, high research and development (R&D) expenditures, along with increasing sales and marketing expenses, are likely to affect business negatively, in this quarter as well.
3D printing is a relatively new concept, which will likely take time to become popular. Furthermore, the industry is highly dependent on patented technologies, which play an important role in determining a company’s performance. 3D Systems is also likely to face tough competition as some of its primary patents are about to expire in 2014. As such, the company is focused on investing in R&D for sustainable long-term growth.
On the other hand, 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.
In the first quarter, the 3D Systems acquired a leading provider of personalized surgical treatments and patient-specific medical devices, Medical Modeling, to broaden its presence in the medical sector. The application of 3D printing in the medical industry is one of the most promising concepts, as complex medical and surgical aids as well as replacement parts can be created using this novel technology and that too, with high precision level.
The company also partnered with Staples Inc. (SPLS) to provide 3D services in two Staples stores in New York and Los Angeles. Following this partnership, the company announced that it intends to acquire a Latin American 3D printing and additive manufacturing company, Robtec, which is expected to be accretive to 3D Systems’ earnings immediately after the deal closes.
The company expects its portfolio of new and innovative products to lead to more than 30% organic growth in the next couple of years, thereby enhancing its margins and earnings, going forward.
Only time will tell whether such investments will indeed bear fruit for 3D Systems.
Earnings Whispers?
Our proven model does not conclusively show that 3D Systems is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Negative Zacks ESP: That is because the Most Accurate Estimate stands at $0.11 while the Zacks Consensus Estimate is higher at $0.12. That is a difference of -8.33%.
Zacks Rank #4 (Sell): 3D Systems’ Zacks Rank reduces the predictive power of ESP because the Zacks Rank #4, when combined with a negative ESP, makes surprise prediction difficult.
We caution against stocks with Zacks #4 and 5 Ranks (Sell-rated stocks) going into the earnings announcement, especially when the company is witnessing negative estimate revisions momentum.
Other Stocks to Consider
Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:
ON Semiconductor Corp. (ONNN), with Earnings ESP of +6.67% and a Zacks Rank #1 (Strong Buy).
Orbitz Worldwide, Inc. (OWW), with Earnings ESP of +100.00% and a Zacks Rank #2 (Buy).
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