3D Systems Corporation (NYSE:DDD) reported its fiscal Q4 earnings last week. Its adjusted EPS of $0.19 was slightly below the Wall Street consensus of $0.20, and down 27% from the same period last year. Non-GAAP earnings came at $0.11 per share. 3D Systems’ revenues jumped 52% YoY to $155 million. The revenue growth can be split into 34% organic growth and 18% growth related to acquisitions. The company’s printers and products sales surged 76%, materials sales rose 39%, and services sales grew 33% during the fourth quarter. On February 5, the Rock Hill, South Carolina-based company had preannounced lower-than-expected FY2013 results. Full year earnings were affected by heavy operating expenses.
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3D Systems reaffirms full year guidance
3D Systems Corporation (NYSE:DDD)’s Q4 operating expenses rose 77% YoY to $50 million. Operating expenses rose to 32.2% of its total sales. The rise in operating expenses was driven by sales force and channel expansion, new product launches, operating costs related to recent acquisitions, and new joint development partnerships.
The company’s management reaffirmed its full year 2014 revenue and earnings guidance. 3D Systems forecasts its full year revenues to come between $680-$720 million, compared to the Wall Street consensus of $699 million. The company says its full year adjusted EPS is likely to be in the range of $0.73-$0.85, compared to analysts’ estimate of $0.82.
However, William Blair analysts Brian Drab, Tim Mulrooney and Josh Berman said in their latest report that they expect 3D Systems Corporation (NYSE:DDD)’s Q1 revenues to increase 45% to $148 million. About $19 million of that is likely to come from the company’s recent acquisitions. William Blair expects gross margins to increase 20 basis points to 52.6%. The analysts expect Q1 adjusted EPS to decline 34% to $0.14, which is much lower than the Wall Street consensus of $0.18. For the full year 2014, William Blair analysts estimate 3D Systems’ revenues to expand 37% to $703 million. But they expect full year adjusted EPS to decline 4% to $0.82.
Is 3D Systems really overvalued?
3D Systems Corporation (NYSE:DDD) shares are trading at around $75. That’s 93 times William Blair’s 2014 adjusted EPS estimate of $0.82. It’s much higher than the historical average of 28-33 times. Notably, 3D Systems is a serial acquirer, and expenses related to acquisitions have become a part of the company’s ongoing normal operations. Such expenses are estimated to eat up about $0.10-$0.12 per share. So, William Blair’s actual estimate is close to $0.71. Based on this number, the stock is trading at 107 times its forward earnings.
The analysts say that valuations of additive fabrication companies like 3D Systems Corporation (NYSE:DDD) reflect the potential for high adoption of 3D printers. Investors believe that the higher-end systems are going to disrupt the tradition manufacturing processes. The research firm says that expectations will align with reality eventually. William Blair has an Underperform rating on the stock.
3D Systems Corporation (NYSE:DDD) shares inched up 0.09% to $74.44 in pre-market trading Wednesday.