Stratasys (SSYS) Q4 Earnings In Line, Revenues Top Estimates

Stratasys Ltd. (NASDAQ:SSYS) reported mixed results for fourth-quarter 2017, wherein earnings matched the Zacks Consensus Estimate while revenues surpassed the same. Both the metrics improved year over year.

In the quarter under review, the company’s non-GAAP earnings per share came in at 16 cents, which increased 6.7% on a year-over-year basis.

Quarter Details

Stratasys’ revenues of $179.3 million outpaced the Zacks Consensus Estimate of $174 million. Also, on a year-over-year basis, the figure rose 2.3%.

Segment wise, Product revenues were up 2.5% from the year-ago quarter to $129.8 million mainly owing to the rise in system revenues. The company stated that the system revenues were driven by the increased demand for “professional rapid prototyping application” oriented F123 Series, the company’s “new J700 Dental Solution” and its “H2000 Large Part FDM 3D Production System”.

Revenues from Services increased 2% year over year to $49.6 million. The upswing can be primarily attributable to 7% growth in customer support revenues mainly driven by growth in the installed base of systems and enhancement of service contract attached rate.

Stratasys’ non-GAAP gross margin contracted 110 basis points (bps) to 52.5%, primarily due to product mix.

The company’s non-GAAP operating expenses decreased 2.3% year over year to $80.6 million. Also, as a percentage of revenues, non-GAAP operating expenses were down year over year from 47% to 44.9%.

Non-GAAP operating income totaled $13.5 million compared with $11.6 million in the year-ago quarter. Operating margins came in at 7.6% compared with 6.6% in the prior-year quarter.

The company exited the quarter with cash and cash equivalents of $328.8 million compared with $302.8 million at the end of the previous quarter. Inventories came in at approximately $115.7 million than $124.1 million last quarter. As of Dec 31, 2017, long-term debt came in at $27.1 million.

Full-Year 2017 Details

For full-year 2017, Stratasys reported revenues of $668.4 million showcasing a decline of 0.6% from the previous year. However earnings surged 60.7% to 45 cents per share as compared to full year 2016.

Guidance

Stratasys issued guidance for full year 2018. The company envisions revenues in the range of $670-$700 million. The Zacks Consensus Estimate is pegged at $684.6 million. Non-GAAP earnings per share are now projected between 30 cents and 50 cents. The Zacks Consensus Estimate is pegged at 61 cents.

Furthermore, the company anticipates non-GAAP operating margin to be in the 4.5-6% band. Capital expenditures are estimated to lie within in the $40-$50 million range.

Stratasys, Ltd. Price, Consensus and EPS Surprise

Stratasys, Ltd. Price, Consensus and EPS Surprise | Stratasys, Ltd. Quote

Bottom Line

Per management, Stratasys’ fourth-quarter 2017 results were positively impacted by improving customer relationships and deeper market penetration in its markets. Additionally, the positive response to the company’s product launches in 2017 has further boosted management’s confidence.

Also, the company’s approach of investing in products related to specific markets is encouraging. This is evident from the positive reaction received by F123 Series and J700 Dental Solution.

Moreover, management is particularly optimistic about the current innovations taking place in the FDM technology namely, Robotic Composite 3D Demonstrator. Stratasys’ software development efforts including the likes of GrabCAD Print and GrabCAD Voxel Print applications are also impressive.

The company also announced the development of a new additive manufacturing process that is meant for addressing the needs of short-run metal manufacturing. Additionally, it is increasing investments for projects incubated internally, which result in expansion of the addressable markets.

We believe that based on all these strategic initiatives, Stratasys are well-poised to enjoy a solid growth trajectory going ahead. However, competition from arch rival 3D Systems Corporation (NYSE:DDD) remains a concern.

Currently, Stratasys carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector are NVIDIA Corporation (NASDAQ:NVDA) and Paycom Software, Inc. (NYSE:PAYC) , each sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term expected EPS growth rates for NVIDIA and Paycom are 10.25% and 25.75%, respectively.

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