Why Is Stratasys (SSYS) Up 9.5% Since Last Earnings Report?

A month has gone by since the last earnings report for Stratasys (SSYS). Shares have added about 9.5% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Stratasys due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Stratasys Q4 Earnings and Revenues Miss Estimates

Stratasys reported fourth-quarter 2019 earnings of 18 cents per share, which lagged the Zacks Consensus Estimate by 14.29%. Moreover, the bottom line was lower than the year-ago reported figure of 21 cents.

Further, Stratasys’ revenues of $160.2 million missed the consensus mark of $170 million and declined 9.5% year over year.

Economic weakness in Europe and Asia remained a major headwind. Decline in materials associated with the company’s legacy platforms also affected the top line.

However, continued strength in the Americas, particularly in the F123 Series was a relief.

Quarter Details

Segment wise, Product revenues fell 12.4% from the year-ago quarter to $109 million. The figure was down 12.1% in constant currency. The decline was due to weakness in Europe and Asia that affected systems sales in those regions.

Within Products revenues, System revenues decreased 20.6%. Consumables revenues fell 2.9% year over year.

System revenues were affected by persistent macroeconomic sluggishness in Europe and Asia. Moreover, decline in certain legacy product lines were also a headwind. However, Stratasys expects new products to offset the headwinds in future.

Materials for high-end platforms including design realism in PolyJet, and advanced materials in FDM increased year over year, reflecting strong customer adoption of high-value application solutions.

Revenues from Services decreased 2.6% to $51.2 million. However, within service revenues, customer support revenues increased 1% year over year.

Increasing adoption of manufacturing-focused platforms in automotive, aerospace and healthcare was encouraging.

Margin

Stratasys’ non-GAAP gross profit decreased 9.2% from the year-ago quarter to $84 million. Non-GAAP gross margin expanded 20 basis points (bps) to 52.4%.

Non-GAAP operating expenses declined 7.4% year over year to $73.8 million driven by efforts to increase cost efficiency.

Non-GAAP operating income totaled $10.2 million, down 20.3%.

Balance Sheet and Cash Flow

The company exited the quarter with cash and cash equivalents of $321.8 million compared with $347.1 million at the end of the previous quarter.

As of Dec 31, 2019, there was no long-term debt.

Net cash used in operating activities in the quarter was $3.4 million.

Guidance

For full-year 2020, the company provided revenue guidance. Revenues are expected in the range of $620-$680 million.

Non-GAAP earnings per share for the full year are expected between 45 cents and 60 cents.

Non-GAAP operating margin is projected between 5% and 6.5%.

Capital expenditures are estimated to lie within $40-$60 million.

About 52% of total full-year revenues is expected come at the second part of the year. Fourth quarter is typically the strongest, while the first quarter is the weakest.

First-quarter 2020 is anticipated to be negatively impacted by significant macroeconomic headwinds due to the coronavirus menace.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -157.14% due to these changes.

VGM Scores

Currently, Stratasys has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Stratasys has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.