3D Systems Corporation (DDD) Earnings: More Than Just Fundamentals

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3D Systems Corporation (NYSE:DDD) is scheduled to release its earnings report before closing bell tomorrow. The company’s stock has lost almost half its value since January as investors began to turn skeptical on the 3D printing industry, also sending 3D Systems’ competitors Stratasys, Ltd. (NASDAQ:SSYS) and ExOne Co (NASDAQ:XONE) lower in recent months.

Stratasys, Ltd. (NASDAQ:SSYS) stock declined as much as 4% today, while ExOne Co (NASDAQ:XONE) skidded 1%.

What to expect in 3D Systems’ earnings report

Writing on The Motley Fool, Dan Caplinger notes that new industries like the 3D printing industry always experience growing pains. He says investors now want to see evidence that 3D Systems Corporation (NYSE:DDD) will be able to defend itself against competitors by growing quickly.

Consensus estimates suggest that 3D Systems Corporation (NYSE:DDD) will report earnings of 15 cents per share on $145.5 million in revenue. That’s a 29% decline in earnings per share but a 43% increase in revenue. Over the last four quarters, the company has not beat consensus estimates even once, which doesn’t bode well for tomorrow’s report.

Caplinger advises analysts to watch not only what 3D Systems Corporation (NYSE:DDD)’s numbers look like, but also signs of an emerging strategy to boost growth.

3D Systems wants to grow faster

In the last earnings report, 3D Systems Corporation (NYSE:DDD) reported 52% revenue growth year over year. Even after accounting for acquisitions, the company’s organic sales growth had risen 34%. However, CEO Avi Reichental’s apparent disappointment with the pace of growth, which was slower than they wanted, put a damper on the company’s stock. Investors also seemed unhappy with the company’s guidance for this year’s revenue, which implies 30% organic growth.

Caplinger says 3D Systems Corporation (NYSE:DDD) must figure out which segment of the 3D printing market it should focus on. The largest growth has been in consumer 3D printers. However, the company had expected even more growth out of the segment than what it has provided so far.

Problems for 3D Systems

On the other hand, 3D printers for metal and the healthcare industry have done better than 3D Systems Corporation (NYSE:DDD) thought they would. Most other 3D printing companies have bigger exposure to the industrial 3D printing segment. As a result, he believes 3D should decide whether to keep spreading itself across all sectors or just focus on certain segments of the industry.

He also notes that 3D Systems Corporation (NYSE:DDD) will likely see new competition popping up overseas, as governments and sovereign wealth funds have taken an interest in 3D printing. As a result, the company could be facing major competition very soon if it doesn’t grow more quickly.

In addition, he says 3D Systems Corporation (NYSE:DDD) shareholders should keep an eye on general volatility, which has been tossing many stocks around recently. Since the company is a high growth stock, movements are likely going to be more violent. Momentum stocks have also been seeing excessive volatility, making 3D Systems a double target for extreme exposure to the waxing and waning of the general market.

And then there is the concern of secondary offerings, which are common in newer industries, as companies often feel the need to raise more capital. As a result, share dilution occurs, which has sent other 3D printing companies into a downward spiral.

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