3D Systems Corporation (NYSE:DDD) is scheduled to release its next earnings report on Thursday. Analysts at RBC Capital Markets believe the company will see improvements in operating leverage throughout the second half of the year, although they aren’t expecting a significant surprise for the June quarter.

3D Systems

What to look for in 3D Systems earnings

In a report dated July 28, 2014, analysts Amit Daryani and Karl Ackerman said they expect both top and bottom line results to be in line with expectations. In their view, investors should be looking for three key items in tomorrow’s report. First, they note that there should be some share dilution because the 3D printer company did offer 6 million new shares.

Second, they say new product launches late in the June quarter should boost 3D Systems’ growth in the second half of the year. And third, they note that the company sold more than 100 3D printing units to a major aerospace company during the June quarter.

Looking ahead to the second half

In the second half of the year, the analysts say focus will be looking at growth, leverage and working capital metrics. 3D Systems did say at its analyst day on June 10 that all of these metrics should begin improving.

The RBC Capital team thinks ramps in the second half of the year, plus benefits from integrating recent acquisitions, should drive expansion in the company’s operating margin. They project a 19% growth in this metric in the second half of the year. They say organic growth, which they’re estimating at more than 30%, should be the biggest upside lever this year as 3D Systems keeps investing in research and development and in selling, general, and administrative expenses.

Estimates for 3D Systems’ June quarter

In tomorrow morning’s earnings report, the analysts are looking for $720 million in revenue and earnings of 80 cents per share. That’s in line with consensus estimates at $714 million in revenue and 81 cents per share in earnings. Their estimate is also toward the high end of 3D Systems’ guidance, which is for revenue between $695 million and $735 million and earnings of between 73 cents and 85 cents per share.

Their revenue estimate represents a 40% year over year increase, with a 44% growth estimate in printer sales. They say recent product ramps should gain momentum in the second half of the year. They estimate an operating margin of 18.7%, which would be a decline of 510 basis points year over year. In the second half, however, they estimate a greater than 19% margin due to leverage. They think 3D Systems is being conservative at the midpoint of its guidance range but that it could increase its 2014 fiscal year guidance.

The RBC Capital team reiterated their $64 per share price target and Outperform rating on 3D Systems heading into Thursday’s earnings report.