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What's in Store for Stratasys (SSYS) this Earnings Season?

Stratasys Ltd. SSYS is set to report first-quarter 2016 results on May 9. Last quarter, the company posted a positive earnings surprise of 20.8%. Let's see how things are shaping up for this announcement.

Factors at Play

Stratasys reported better-than-expected fourth-quarter 2015 results. However, year-over-year comparisons were unfavourable. The company’s quarterly results were negatively impacted by difficult global macroeconomic conditions and lower-than-expected performance of its MakerBot business.

The company revealed that revenues from the MakerBot business were significantly hurt by overall market weakness and persistent softness related with its business restructuring.

It is worth mentioning that during the quarter, Stratasys cut its workforce by about 10% in an effort to reduce operating costs.

However, some customers are delaying their purchases owing to the current economic conditions. In the 3D printer business, the majority of customers have moved toward the lower-priced uPrint, which may affect the company’s margins in the upcoming quarters. Going forward, competition from 3D Systems Corporation DDD is a potent headwind.

Earnings Whispers

Our proven model does not conclusively show that Stratasys is likely to beat estimates 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. That is not the case here as you will see below.

Zacks ESP:  ESP for Stratasys is 0.00% since both the Most Accurate estimate and the Zacks Consensus Estimate stand at a loss of 15 cents per share.

Zacks Rank: Stratasys’ Zacks Rank #3 when combined with a 0.00% ESP makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Stocks to Consider

Here are a couple of stocks which you may consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Synopsys Inc. SNPS, with an Earnings ESP of +6.38% and a Zacks Rank #1

Agilent Technologies, Inc. A, with an Earnings ESP of +2.56% and a Zacks Rank #3

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
SYNOPSYS INC (SNPS): Free Stock Analysis Report
STRATASYS LTD (SSYS): Free Stock Analysis Report
AGILENT TECH (A): Free Stock Analysis Report
3D SYSTEMS CORP (DDD): Free Stock Analysis Report
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