3D Systems (NYSE: DDD) is up over 100% since our initial coverage here. (Updated 01/07/21)
3D Systems Corporation (NYSE: DDD) provides comprehensive 3D products and services, including 3D printers, print materials, on-demand manufacturing services and digital design tools. Its ecosystem supports advanced applications from the product design shop to the factory floor to the operating room.
The Company will be discussing its financial results for the third quarter and first nine months of 2017 on Tuesday, October 31, 2017. DDD is likely to post a revenue growth of 2% to 6% along with a positive EPS as against a negative EPS in 2016. Additionally, it is expected to generate positive cash flow from operations for the full year 2017.
Historically, DDD has operated at a low growth business with flat margins. On the flip side, the company does have a robust balance sheet with reasonably conservative capital structure. However, to leverage on the same, it is expected to significantly improve its execution and position itself for long-term success and profitable growth in 2018 and beyond.
As per management, they are keenly focused on delivering production solutions that provide durability, repeatability, productivity, and leadership in total cost of operations. The company’s investments, innovation, and improved execution will enable the transition in 3D printing from prototyping to production. Additionally, surging demand for production printers, materials and software are expected to be major catalysts, driving growth.
From a sector perspective, 3D Systems expects healthy demand from healthcare and industrial customers. The additive manufacturing industry crossed $5.1 billion worldwide in 2016 and had grown at a CAGR of 26.2% over the past three decades.
DDD has been doing acquisitions to expand its offerings, leverage on synergistic technology and widen its domain expertise in this growing industry. In January 2017, it announced the acquisition of dental materials provider, Vertex-Global., operating under the Vertex and NextDent brand names.
Considering these factors along with the fact that DDD is leader in additive manufacturing market, it is likely to benefit from advancements in the industry, materials innovations and paradigm shift in additive manufacturing processes from prototyping to production (While this is happening at a slower pace, this might be the major inflection point for DDD to substantially increase revenue and profits in the future)
Therefore, with an expectation that company will exhibit growth over the near to medium term, it is available at a discount at current levels. Analysts covering the stock believes that anywhere below $12 would be a prudent entry point and should eventually reward investors.
About the Company: 3D Systems provides comprehensive 3D products and services, including 3D printers, print materials, on-demand manufacturing services and digital design tools. Its ecosystem supports advanced applications from the product design shop to the factory floor to the operating room.
3D Systems’ precision healthcare capabilities include simulation, Virtual Surgical Planning, and printing of medical and dental devices as well as patient-specific surgical instruments.
Pictorial presentation of some of the company’ product:
Other Recent Announcements:
CE Mark for its D2P™ software for healthcare applications: On October 16th, the company announced the achievement of CE Mark for its D2P™ software for healthcare applications. 3D Systems’ D2P software allows surgeons and medical staff with no technical background to quickly create accurate, digital 3D anatomical models from medical imaging data. These patient-specific models can be used for advanced visualization, 3D printing, surgical planning, and as an input into the design of patient-specific guides and instrumentations.
In EMO Hannover 2017, the leading international trade fair, DDD showcased how customers are using its end-to-end additive manufacturing solutions to optimize designs, enhance workflows, bring products to market faster and transform manufacturing workflows. It also highlighted the company’s expertise in high-volume, direct metal printing solutions for aerospace, automotive, and healthcare industries.
Second quarter financial results
Revenue: For the second quarter of 2017, the company reported revenue growth of 1% to $159.5 million compared to $158.1 million in the second quarter of the previous year. The company reported a second-quarter GAAP loss of $0.08 per share compared to a loss of $0.04 per share in the prior year and non-GAAP earnings of $0.08 per share compared to non-GAAP earnings of $0.12 per share in the second quarter of 2016.
Gross profit margin for the second quarter of 2017 was 50.6% compared to 50.9% in the second quarter of 2016 as cost savings from manufacturing and supply chain improvements continue to support strategic investments and competitive pricing.
Liquidity and financial flexibility: During the quarter, the company used $1.0 million of cash from operations and ended the quarter with $154.0 million of cash on hand.
The outlook for the third quarter:
For the full year 2017, management expects revenue growth of 2% to 6% resulting in a revenue range of $643 million to $671 million. Management expects GAAP earnings per share to be a loss of approximately 14 cents per share in 2017 compared to a loss of 35 cents per share in 2016. Management expects non-GAAP earnings per share to be approximately flat for the full year 2017 compared to non-GAAP earnings of 46 cents per share for the full year 2016. Additionally, management expects to generate positive cash flow from operations for the full year 2017.
Key risk factors and potential stock drivers:
DDD’s business risk profile remains constrained by muted growth in its scale of operations. The company for several quarters now is guiding about the same revenue and not much in EPS as well. The overall outlook on the company may be revised to Positive, if the revenues and profitability increases substantially leading to an improvement in its business and operations profile.
Notwithstanding, the fact that the 3D printing space has grown, the profitability of DDD has been under pressure in the recent past. The margins going forward are expected to improve with the growth in high yielding business like production printers, materials, software and healthcare businesses.
Although the improvement process might take time, but focus on the shift to production makes 3D Systems attractive. Also, significant investments in R&D is likely to trigger growth over the medium term.
The company’s near-term stock movement is also dependent on its upcoming quarterly result, any major adversities (i.e., weaker than expected operating performance as reflected in weaker sales growth or profitability) could impinge the stock performance.
Historically, DDD has a mixed bucket of earnings surprise, wherein it exceeded estimates twice in the trailing four quarters, with an average favourable surprise of ~5%.
Stock Chart:
- On Friday, October 27th, 2017, DDD closed at $11.54 on an average volume of 2.25 million shares exchanging hands. Market capitalization is $1.31 billion. The current RSI is 38.45
- In the past 52 weeks, shares of DDD have traded as low as $11.38 and as high as $23.70
- At $11.54, shares of DDD are trading below its 50-day moving average (MA) at $12.85 and below its 200-day MA at $16.10
- The present support and resistance levels for the stock are at $11.35 & $11.82 respectively.
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