On Dec 27, 2013, we upgraded our recommendation on Stratasys Inc. (SSYS) to Outperform from Neutral, based on its favorable prospects and long-term outlook. The company reported encouraging third-quarter results on the back of solid performances from its Product and Services segments.
Currently, the stock sports a Zacks Rank #1 (Strong Buy).
Why the Upgrade?
Stratasys has delivered positive earnings surprise in two of the last four quarters, with an average beat of 284.3%. Also, Stratasys delivered robust revenues in third-quarter fiscal 2013 buoyed by solid performances by its Product and Services segments. Reported revenues also surpassed the Zacks Consensus Estimate.
Additionally, management provided an encouraging outlook for fiscal 2013. Revenues are expected to range between $470 million and $490 million, up from the previous guidance of $455.0 million to $480.0 million. Stratasys’ earnings are anticipated in the range of $1.75 to $1.90 per share, significantly higher than the Zacks Consensus Estimate of $1.43 per share.
Stratasys’ product launches and global expansion will help it to generate incremental sales in the long run by increasing its installed base. Moreover, the MakerBot acquisition is expected to aid its 3D systems business growth and generate higher recurring revenues, going forward.
With the assimilation of Stratasys’ 3D printing application programming interface into Microsoft’s (MSFT) Windows 8.1, its adoption rate is likely to increase. However, the company is concerned about its high-cost business model and competition from big and small players like 3D Systems Corp. (DDD).
Nonetheless, the company witnessed positive estimate revisions for the current quarter. Out of the three estimates, one was revised upwards over the past 60 days. This led to a significant increase of 39 cents in the Zacks Consensus Estimate for the current quarter, which now stands at 41 cents. In addition, for the full year, the Zacks Consensus Estimate jumped significantly to $1.43.
Investors may also consider another stock, Alps Electric Co. Ltd. (APELY), carrying a Zacks Rank #1 (Strong Buy).
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