Stratasys' (SSYS) Q1 Earnings Beat Estimates, Revenues Match

Stratasys Ltd. (NASDAQ:SSYS) reported first-quarter 2019 earnings of 10 cents per share, which surpassed the Zacks Consensus Estimate of 7 cents. The bottom line was higher than the year-ago figure of 5 cents.

Stratasys’ revenues of $155.3 million matched the consensus estimate and surpassed the year-ago figure by 1%.

Continued strength in sales of high-end system and materials for PolyJet and FDM technology platforms, especially in North America aided the top line. Strong customer interest in its new products was also a positive.

However, Stratasys faced foreign exchange fluctuations, which led to currency headwinds worth $3 million, thus affecting the top line.

Quarter Details

Segment wise, Products revenues rose 1% from the year-ago quarter to $105.1 million. This figure was up 4%, excluding divested entities.

Within Products revenues, System revenues increased 1%. Taking divestitures into account, the figure increased 4%. Consumables revenues increased 1% year over year but were up 3% excluding divestitures, driven by strength in demand in the United States.

Revenues from Services increased 1% year over year to $50.2 million. The rise was primarily attributed to 1% growth in customer support.

Stratasys’ F123 printers, particularly the Elastomer TPU material-enabled edition, gained significant traction in the U.S. market.

The company continued to witness increased adoption of target verticals of aerospace, automotive, healthcare and dental. Moreover, momentum in demand for the F380 Carbon Fiber Edition of the F123 Printer was also encouraging.

Stratasys also commenced shipping of the new MakerBot Method at the end of the first quarter, after witnessing strong pre-order demand.

Margin

Stratasys’ non-GAAP gross profit decreased 0.6% from the year-ago quarter to $80.7 million. Non-GAAP gross margin contracted 80 basis points (bps) to 52% due to a mix in revenue sources.

Non-GAAP operating income totaled $6.8 million, up 38.8% from the year-ago quarter. Operating margin expanded 120 bps to 4.4%.

Balance Sheet and Cash Flow

The company exited the quarter with cash and cash equivalents of $367.8 million compared with $393.2 million at the end of the previous quarter.

As of Mar 31, 2019, there was no long-term debt compared with $22 million at the end of the prior quarter.

Net cash provided by operating activities in the quarter was $4.6 million.

Guidance

For full-year 2019, the company reiterated its guidance. Revenues are expected in the range of $670-$700 million.

Non-GAAP earnings per share for the full year are expected between 55 cents and 70 cents.

Non-GAAP operating margin is projected to be in the 5.5-6.5% band.

Capital expenditures are estimated to lie within $45-$60 million.

Management is optimistic about its product lineup, which is expected to expand its addressable markets, resulting in accelerated growth from 2020.

Management expects continued demand for high-end PolyJet solutions from industries, including consumer-packaged goods and medical segments.

Additionally, management is optimistic about upcoming innovations in FDM and PolyJet portfolios.

Zacks Rank and Key Picks

Stratasys currently has a Zacks Rank #3 (Hold).

A few better-ranked stocks in the broader Computer and Technology sector are ACI Worldwide, Inc. (NASDAQ:ACIW) , Cadence Design Systems, Inc. (NASDAQ:CDNS) and Verint Systems Inc. (NASDAQ:VRNT) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for ACI, Cadence and Verint is projected to be 12%, 12% and 11%, respectively.

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