Stratasys Inc. (SSYS) reported earnings per share of 25 cents in the third quarter of 2011, outpacing the Zacks Consensus Estimate by 6 cents.
Revenue
Stratasys reported total revenue of $39.7 million in the third quarter of 2011, up 31.0% from $30.3 million in the year-ago quarter. Total revenue in the reported quarter includes contribution from the newly acquired Solidscape Inc. The acquisition was completed in April this year and contributed $2.9 million to the quarter’s results.
This apart, system shipments totaled 600 units in the third quarter of 2011, compared with 631 units in the year-ago quarter.
Segment wise, revenues from Products came in at $32.3 million, up 34.6% from $24.0 million reported in the year-ago quarter. Services revenue jumped 18.3% to $7.44 million from $6.29 million in the year-ago quarter.
Operating Results
Gross profit stood at $21.6 million (54.3% of the total revenue) in the third quarter of 2011, up 46.5% from $14.7 million (48.6% of the total revenue) in the year-ago quarter. Significant gross margin improvement was witnessed as revenue growth exceeded the increase in cost of sales.
Operating income in the quarter was $7.9 million versus $4.1 million in the third quarter of 2010. However, operating expense increased 28.7% year over year primarily due to higher R&D and SG&A expenses. The growth in higher margin products as well as a continued favorable product mix of high margin products contributed to the significant margin expansion in the quarter.
The company reported net income of $5.86 million or 27 cents per share in the third quarter compared with $3.18 million or 15 cents per share reported in the prior-year quarter. Non-GAAP net income, which excludes certain discrete items such as acquisition related expenses and inventory revaluation but includes stock-based compensation expense, came in at $5.46 million or 25 cents per share in the third quarter compared with $3.17 million or 15 cents per share in the prior-year quarter.
Balance Sheet
The company exited the third quarter with cash and cash equivalents of $15.2 million, down from $15.5 million in the previous quarter. The company does not have any long-term debt.
Guidance
The company expects total revenue in the range of $175.0 million to $190.0 million for the fourth quarter of 2011. Earnings per share are projected in the $1.02 to $1.13 per share range for the same period.
Conclusion
The company reported solid third quarter results with EPS exceeding our expectation and revenue improving on a year-over-year basis. Additionally, the company’s new collaboration with technology major Hewlett-Packard Company (HPQ) is expected to drive growth going forward. This apart, the increasing revenue generation ability of the newly acquired Solidscape is another positive for the company.
However, we are a bit apprehensive about the company’s high cost business model and stiff competition from big and small players like 3D Systems Corp. (DDD).
The company has a Zacks #2 Rank, which implies a short-term Buy rating on the stock.
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STRATASYS INC (SSYS): Free Stock Analysis Report
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