Did the Tide Just Turn for 3-D Printing Stocks?
Aug 9th 2013 6:30PM
Updated Aug 9th 2013 6:32PM
Last week, I cautioned investors not to panic when shares of 3D Systems' plunged by as much as 10% after the company missed estimates with its second-quarter earnings results.
After all, the additive manufacturing company did handily beat revenue estimates after growing sales 45% year over year to $120.8 million. In addition, though its earnings did fall by $0.01 per share over last year's second quarter, that was largely thanks to dilution from 3D Systems' recent latest stock issue, the funds from which they've already used to further fuel growth by acquiring two new businesses.
As a result, I also suggested that the pullback was a great time to buy shares of 3-D printing companies, in general, especially as they tend to move in tandem with one another. To be sure, fellow 3-D printing company stocks including Stratasys and ExOne dropped by around 4% and 6%, respectively, after 3D Systems' disappointing report.
Even so, considering Stratasys itself also had to issue millions of new shares as part of its $400 million deal to merge with up-and-coming 3-D printer MakerBot, I certainly wasn't alone in wondering whether Stratasys' earnings report Thursday morning would bring a similar pullback to extend the temporary losing streak in 3-D printing stocks.
Pullback? What pullback?
Unfortunately, for those looking for an even lower entry point, Stratasys' second quarter report yesterday sent its shares up more than 14% when all was said and done.
As it turns out, Stratasys is finally beginning to realize the benefits of its enormous 2012 merger with fellow industry leader Objet. More specifically, Stratasys CEO David Reis says the company's "growth in the second quarter accelerated compared to the first quarter, as the benefits of our recent channel integration and cross-selling initiatives have begun to materialize."
Better yet, Reis also noted Stratasys' margins improved as a direct result of the operating synergies produced by the Objet merger.
All told, adjusted revenue for the second quarter grew 20% organically, to $106.7 million, while adjusted net income rose 32%, to $0.45 per diluted share. For reference, analysts were expecting earnings of $0.44 per share on $105.5 million in sales.
Going forward, while management says the MakerBot merger is planned to close later this month, and will still be dilutive to adjusted earnings in 2013, they tempered shareholders' fears by stating it should be accretive to earnings by the end of 2014.
As a result, Stratasys took the opportunity to revise its fiscal 2013 guidance, telling investors to expect full-year revenue between $455 and $480 million, and non-GAAP earnings of between $1.75 and $1.90 per share. For those of you keeping track, that's an increase over Stratasys' previous sales guidance of $430 million to $445 million, and a decrease from its previous non-GAAP earnings guidance of between $1.80 to $1.95 per share.
That said, today's pop shows that $0.05 per-share earnings reduction isn't nearly as bad as analysts had feared, especially considering it assumes no operating or revenue synergies related to the future integration of MakerBot.
In a very different fashion than 3D Systems' earnings report accomplished last week, Stratasys just reaffirmed the 3-D printing industry is not only here to stay, but continues to grow ever stronger. It should come as no surprise, then, that fellow 3-D printing companies like 3D Systems and Exone closed solidly in the black Thursday on the heels of Stratasys' solid results.
Then again, industrial 3-D printer extraordinaire ExOne is all set to release its own earnings next Wednesday, August 14, so there's still a chance eager investors waiting for another pullback may just find their chance then. But remember, ExOne is still only a fraction of the size of the much larger 3D Systems and Stratasys, and its laser focus on high-end commercial printers makes it a less effective gauge for the overall strength of the industry.
In the end, that's why I think today's report has officially turned the tide in the bulls' favor.
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The article Did the Tide Just Turn for 3-D Printing Stocks? originally appeared on Fool.com.Fool contributor Steve Symington owns shares of 3D Systems. The Motley Fool recommends 3D Systems, ExOne, and Stratasys. The Motley Fool owns shares of 3D Systems, ExOne, and Stratasys and has the following options: short January 2014 $36 calls on 3D Systems and short January 2014 $20 puts on 3D Systems. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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