3D Systems Corporation Now Needs To Impress Investors With Execution

3D Systems Corporation (NYSE:DDD)’s stock is down 46% this year so far compared to a gain of 1.5% by the S&P 500. According to a report from JPMorgan dated April 24, 2014 from analysts Paul Coster, Mark Strouse and Paul J Chung, the decline could largely be attributed to the “unexpected reset of near-term margin expectations” and the broad sell-off in “momentum” stocks. 3D Systems will report its first quarter results on April 29 and will hold a conference call at 9 am ET.


Focus, now, more towards execution

So far, 3D Systems Corporation (NYSE:DDD) has done well to seize “acquired growth opportunities,” but now, according to the analysts, the main concern is whether or not the company can successfully integrate the acquisitions made into a “coherent scalable platform.” It also remains to be seen how 3D Systems Corporation (NYSE:DDD) could come up with “multiple new growth initiatives” for new markets without compromising operating margins.

Investors so far have been attracted to the concept of 3D printing and the company’s huge TAM opportunity. Now the focus is shifting more towards execution, and analysts have listed a few areas of concern, like payback on the Cubify initiative, mix-shift toward higher margin consumables, impact of the investment on operating expenses, and time taken to get the announced product to the market.

3D Systems may reiterate 2014 outlook

For the first quarter, the JPMorgan analysts expect 3D Systems Corporation (NYSE:DDD) to post EPS of 13 cents on revenue of $143.2 million, compared to the consensus estimate of EPS and revenue of 15 cents per share and $145.8 million, respectively.

Revenue from Printers / Software is expected to come in at $52.9 million, while from Materials, it is expected to be $38.9 million, and $51.4 million from Services. For the quarter, operating margin is expected to be 15.3%, which is a year over year decline of 10 percentage points, primarily due to an increase in investment.

For 2014, analysts expect 3D Systems Corporation (NYSE:DDD) to reiterate its outlook. For the year, EPS guidance is 73 cents to 85 cents on $680 million to 720 million in revenue. Analysts at JPMorgan forecast EPS of 85 cents on revenue of $685.9 million, compared to the consensus estimate of 81 cents on revenues of $701.3 million. Investors presently are largely focused on margins, so any increase in revenue guidance without an increase in EPS guidance may not impress investors, believe the analysts.

The JPMorgan analysts have a Neutral rating on 3D Systems Corporation (NYSE:DDD) with a price target of $54 and believe that the “risk-reward is balanced.”

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About the Author

Aman Jain
Aman is MBA (Finance) with an experience on both Marketing and Finance side. He has worked as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, reviewing tech gadgets, playing PC games and cricket. - Email him at [email protected]

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