On Mar 1, Zacks Investment Research downgraded 3D Systems Corporation (NYSE:DDD) to a Zacks Rank #5 (Strong Sell) from a Zacks Rank #3 (Hold).
Why the Downgrade?
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Earnings estimates for 3D Systems have declined, owing to disappointing fourth-quarter 2013 results. The company has delivered negative earnings surprises in 3 out of 4 quarters, with an average miss of 12.78%. Additionally, the company’s stock price has fallen more than 20% since Jan 2014.
On Feb 28, 2014, 3D Systems reported fourth-quarter and full year 2013 results. For the quarter, non-GAAP earnings came in at 16 cents per share, which was 27.3% below the Zacks Consensus Estimate of 22 cents.
The gross margin was flat year over year at 51.7% as higher sales were more than offset by unfavorable mix and extraordinarily high concentration of new product announcements. The operating margin also contracted approximately 620 basis points to 11.6% versus 17.9% in the prior-year quarter. During the quarter, the company witnessed a rise in research and development (R&D) expenditures as well as sales and marketing expenses.
The 3D printing industry is highly dependent on patented technologies, which play an important role in determining a company’s performance. 3D Systems is likely to face stiff competition in the future as some of its primary patents are about to expire in 2014.
Following the earnings release, the Zacks Consensus Estimate for 2014 declined 15.6% to 81 cents per share in the last 7 days. For 2015, the Estimate fell 18.3% over the same time period and is currently pegged at $1.25 per share.
Notably, 3D printing is a relatively new concept and is likely to take time to gain popularity. Most of the stocks in the industry are on the downhill so far in 2014. Share prices of Stratasys Ltd. (SSYS) and ExOne Co.(XONE) are down 7.5% and 27.9% respectively while that of Voxeljet AG (VJET), a recently-listed 3D printing company, is down 16.02% year-to-date.