3D Systems (DDD) Q1 Earnings: What Factors Are At Play?

3D Systems Corporation (NYSE:DDD) is slated to report first-quarter 2017 earnings, before the opening bell on May 3.

3D Systems has an impressive earnings surprise history, having posted three massive beats over the trailing four quarters. Last quarter, it surpassed estimates by 50%.

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

Factors to Consider

Over the past couple of quarters, 3D Systems’ healthcare business has proved to be its strongest profit churner. Healthy demand for printers and materials for medical and dental customers has been fuelling growth of this segment. These trends are expected to supplement top-line growth of the soon-to-be-reported quarter. In a bid to fortify its healthcare offerings during the first-quarter, 3D Systems expanded its Virtual Surgical Planning service and rolled out the revolutionary Figure 4 platform.

Further, it announced the acquisition of dental materials provider, Vertex-Global Holding B.V., which operates under the Vertex and NextDent brands. This apart, 3D System’s first-quarter 2017 top line is expected to benefit from robust demand for production printers, materials and software. Of late, the company has witnessed impressive recovery in production solutions and metals business. This is expected to drive the upcoming results.

Over the past year, 3D Systems has been making concerted efforts to improve it quality, reliability and supply chain and has made significant progress. It has improved the cost structure by focusing on IT infrastructure, go-to-market and innovation, and re-invested these savings back into key areas. We believe these diligent restructuring efforts will likely boost first-quarter profitability.

Despite these positives, 3D Systems broader market concerns have thwarted growth of the premium 3D printing company. The industry is battling a widespread decline in demand for enterprise 3D printers over the past two years. Other headwinds, including economic slowdown, inflation, currency fluctuations and commodity prices vagaries, have also marred the performance of most players in the industry.

In addition, the company’s escalating research and development costs, and higher expenses related to IT and go-to-market initiatives may play a spoilsport for the operating income performance. Moreover, intensifying competition in the industry, rapid technological changes, and alterations in customer requirements and preferences pose as concerns for the upcoming results.

Earnings Whisper

Our proven model does not conclusively show that 3D Systems will beat earnings 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 7 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 #2. Though Zacks Rank #1, 2 and 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 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:

eGain Corp. (NASDAQ:EGAN) has an Earnings ESP of +50.00% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

AMETEK, Inc. (NYSE:AME) has an Earnings ESP of +1.79% and a Zacks Rank #2.

DragonWave Inc. (TO:DRWI) has an Earnings ESP of +8.82% and a Zacks Rank #2.

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