Proto Labs, Inc. (PRLB) is scheduled to report third-quarter 2014 results on Oct 23, before the market opens. The Zacks Consensus Estimate for the quarter is pegged at 43 cents per share.
The company performed impressively over the last three quarters, with an average earnings surprise of +7.24%. In the second quarter, earnings of 42 cents per share beat the Zacks Consensus Estimate of 38 cents by 10.53%. Let us see how things are shaping up for Proto Labs this quarter.
Factors to Influence Q3 Results
Proto Labs specializes in manufacturing custom parts for prototyping and short-run production. The company has a strong product-line, with new introductions likely to capture a greater market share. Demands for its services are high among product developers using three-dimensional computer-aided design to develop products across a diverse range of end-markets.
Also, Proto Labs’ acquisition of FineLine Prototyping, in Apr 2014, complements its existing computer numerical control (CNC) machining and injection molding services. Integration is currently underway.
However, in the preceding quarter, the company suffered an adverse impact from increasing cost of sales and operating expenses. An increase of roughly 5.5% in cost of sales led to a fall of 70 basis points in the gross margin. Further, mounting expenses will be detrimental to Proto Labs growth.
Earnings Whispers?
Our proven model does not conclusively show that Proto Labs is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Zacks ESP: Expected Surprise Prediction or ESP of Proto Labs is currently 0.00%. This is because both the Most Accurate Estimate and the Zacks Consensus Estimate is pegged at 4 cents per share.
Zacks Rank: Proto Labs currently carries a Zacks Rank #3 (Hold). This rank, when combined with a 0.00% ESP, makes surprise predictions difficult.
We caution against stocks with Zacks Ranks #4 and #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing a negative estimate revision momentum.
Other Stocks to Consider
Here are some companies in the machinery industry that you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:
Nordson Corporation (NDSN), with an Earnings ESP of +0.88% and a Zacks Rank #2 (Buy).
Caterpillar Inc. (CAT), with an Earnings ESP of +2.26% and a Zacks Rank #3 (Hold).
Gorman-Rupp Co. (GRC), with an Earnings ESP of +5.26% and a Zacks Rank #3.
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