3D Systems Corporation (DDD) Lowers EPS Guidance, Stock Crashes

3D Systems Corporation (NYSE:DDD) lowered its non-GAAP EPS guidance for FY 2013 in the range of $0.83 to $0.87 against its earlier guidance of $0.93 to $1.03.

3D Systems Corporation (NYSE:DDD)’s preliminary full year results revealed lower earnings per share thanks to its significant R&D, manufacturing and marketing investments.

Reacting to the lowered guidance, 3D System’s stock fell over 25% today.

The content-to-print solutions provider expects to report final fourth quarter and full year 2013 results on February 28, 2014.

3D Systems sacrifices short term for long term

During the fourth quarter, 3D Systems Corporation (NYSE:DDD) made very significant R&D manufacturing and marketing investments designed to accelerate revenue growth that resulted in substantially compressed earnings for the fourth quarter.

While unveiling the preliminary results, 3D Systems’ President and Chief Executive Officer Avi Reichental said: “We are willing to tolerate earnings reduction and even slight gross profit margin compression during this period to substantially accelerate our growth rate and market share. We firmly believe that these accelerated investments that already resulted in the announcement of 24 new products over the past nine weeks position the company to double its revenue over the next couple of years on organic growth of at least 30% going forward and to achieve greater earnings power and profitability over the long term.”

3D Systems in a bruising market share battle

As reported earlier, 3D Systems Corporation (NYSE:DDD) is in a bruising market share battle with Stratasys, but neither stock has matched the optimism of analysts.  With P/E multiples high and skeptical hedge fund managers acknowledging their shorts of stocks that have failed to deliver on the market hype, it could be a rocky year for the 3-D printing sector, despite all the glowing outlooks.

Some fund managers have been saying, including Dialectic capital, who noted in their 4th quarter investment newsletter, first reported in ValueWalk, that 3-D printing (including 3D Systems Corporation) was “in the middle of a clear valuation bubble,” noting that public hype for the industry has moved valuation past any reasonable expectation that earnings will catch up with the stock price.

2014 revenue in $680-$720 million range

While announcing its preliminary results, 3D Systems Corporation (NYSE:DDD) indicated that compared to its expectations, the company experienced much stronger professional 3D printers and materials demand and softer on-demand parts and consumer demand during the fourth quarter. As a result, the company anticipates to report its December backlog nearly doubled sequentially to $28 million which included multiple advanced manufacturing 3D printers orders that it plans to deliver over the next year.

3D Systems Corporation (NYSE:DDD) further indicated that with its management continuing to balance its focus on growth with emphasis on long-term profitability, the company expects its 2014 revenue to be in the range of $680 million to $720 million and expects GAAP earnings per share in the range of $0.44 to $0.56 and non-GAAP earnings per share to be in the range of $0.73 to $0.85.

3D Systems Corporation (NYSE:DDD) stock is currently trading at $57.75, down 24%.

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About the Author

Mani is a Senior Financial Consultant. He has worked in Senior Management role in large banking, financial and information technology organizations. He has provided solutions for major banking and securities firms across the globe in the area of retail, corporate and investment banking. He holds MBA (Finance) and Professional Management Accounting Qualifications. His hobbies are tracking global financial developments and watching sports

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