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3D Systems (DDD) Q2 Results: Is a Surprise in the Cards?

3D Systems Corporation DDD is slated to report second-quarter 2017 earnings after the closing bell on Aug 2.

3D Systems missed earnings estimates by a whopping 71.4% in the last reported quarter.

Let's see how things are shaping up for this announcement.

Factors to Consider

Over the past few years, 3D Systems’ healthcare business has proven to be its strongest profit churner. To make the most of the positive industry trends, the company has developed a spectrum of innovative solutions ranging from simulation to implants. Recently, it forayed into spinal surgery training with the launch of Simbionix SPINE Mentor, a hands-on simulated training and practice tool.

We believe the new offerings, coupled with high demand for printers and materials from medical and dental customers, will continue to raise the healthcare business top line for the soon-to-be-reported quarter. This apart, demand for production printers, materials and software is expected to act as major catalysts, supplementing growth.

In this regard, the previously launched ultra-fast, modular 3DXpert software solution for direct metal 3D printing and upgraded version of Figure 4 technology – the Stereolithography system – are likely to ramp up the second-quarter top line. In addition, the company has successfully improved its cost structure and optimized its supply chain through concerted restructuring efforts. Cost savings, accruing from these supply chain and manufacturing improvements, are expected to boost sales for the quarter under review.

Despite these positives, 3D Systems is facing strong short-term headwinds, which are likely to weigh down on its second-quarter financials. For quite some time now, waning demand for printers has added to the company’s concern. For full-year 2016, total revenue from printers declined 21%. This trend has extended to 2017. Moreover, first-quarter 2017 sales have continued to plunge. We believe these weaknesses will persist and mar second-quarter results.

Historically, currency fluctuations and commodity price vagaries have affected sales and are likely to play spoilsport for the soon-to-be-reported quarter. This apart, 3D Systems has to contend itself with strong competition, which often results in price cuts and lower profitability. The entry of HP Inc. and General Electric has shaken things up in the industry and pose as concerns for 3D Systems.

Earnings Whispers

Our proven model does not conclusively show that 3D Systems will beat estimates in this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here as you will see below.

Zacks ESP: Earnings ESP for the company is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate currently stand at 6 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: 3D Systems has a Zacks Rank #3. Though a Zacks Rank #1, 2 or 3 increase the predictive power of the ESP, the company’s ESP of 0.00% makes surprise prediction difficult.

Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks that Warrant a Look

Here are some companies that you may want to consider, as our model shows that these also have the right combination of elements to post an earnings beat this quarter.

KEMET Corporation KEM has an Earnings ESP of +11.11% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

CACI International Inc CACI has an Earnings ESP of +1.83% and a Zacks Rank #2.

Arrow Electronics, Inc. ARW has an Earnings ESP of +1.13% and a Zacks Rank #2.

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3D Systems Corporation (DDD): Free Stock Analysis Report
 
CACI International, Inc. (CACI): Free Stock Analysis Report
 
Kemet Corporation (KEM): Free Stock Analysis Report
 
Arrow Electronics, Inc. (ARW): Free Stock Analysis Report
 
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