3D Systems Benefiting From Restructuring & Positive Trends

3D Systems’ (NYSE:DDD) robust healthcare portfolio, strategic partnerships and successful product launches have managed to catch the eye of investors, as year to date, the company’s shares have returned over 14 times the Zacks categorized Computer Mini-Market industry average of 5.1%.

As analysts have maintained a neutral stance toward the stock, the Zacks Consensus Estimate remained unchanged at 9 cents over the past couple of months.

Here’s highlighting few of the strongest growth drivers of the company that signal bright days ahead.

Factors Fueling Growth

Sturdy demand for production printers, materials and software, as well as healthcare solutions have been acting as key profit churners. Moreover, 3D Systems is well on track toward transitioning itself from prototyping to production domain in order to boost profitability. Unveiling products, including the 3DXpert software solution for direct metal 3D printing as well as upgrading the Stereolithography system highlights some of these initiatives.

Currently, the company is focusing on expanding its quickparts services, facilitating channel expansion, developing new products, boosting growth of its healthcare solution and providing integrated 3D platform for customers. In addition, we believe that the company’s concerted streamlining actions bode well for operational efficiency in the long run. Changes being implemented in the sales network and lean manufacturing initiatives deployed in the supply-chain operations are likely to be conducive to the company’s growth.

We perceive that these efforts will significantly reduce 3D Systems’ cost of sales, operating expenses as well as generate cost savings, thereby driving growth. This apart, positive industry trends are likely to accelerate the company’s growth momentum, going forward. According to the research reports of Markets and Markets, the global 3D printing market is projected to grow to $30.2 billion by 2022, reflecting an anticipated compound annual growth rate of 28.5% from 2016 to 2022.

Transition from prototypes to end-user products, mass customization, production of complex parts and government investments in 3D printing projects are estimated to stoke the growth of this billion dollar industry. For instance, sectors like automotive, consumer products, government and defense, industrial/business machines, education research and others (arts and architecture) are expected to raise demand for 3D printing products.

Apart from this, aerospace and the trillion-dollar oil & gas industry are showing a penchant for 3D printing too, that will aid the company’s growth in future. Consequently, 3D Systems has been making acquisitions to diversify its offerings, add synergistic technology and fortify its domain expertise in operating markets. Encouragingly, the company has already secured an important place in sectors like manufacturing, medical and aerospace, while also pursuing unconventional sectors like food and fashion.

What’s Restricting Growth?

Over the past few quarters, 3D Systems has been experiencing unfavorable broader market conditions that have badly hampered its financial performance. Macroeconomic factors, such as economic slowdown, inflation, currency fluctuations, commodity prices and credit availability, hurt the company’s performance.

This apart, the company sells a variety of products, materials and services to a large number of domains. These products, applications and channels involve a range of products with different gross profit margins, vulnerable to substantial quarterly fluctuations, depending upon the mix of product shipments in each quarter. Additionally, introduction of new products or services can likely trigger quarterly fluctuations in gross profit and margins due to manufacturing ramp-ups and start-up costs.

Stocks to Consider

Some better-ranked stocks in the same space include Barracuda Networks, Inc. (NYSE:CUDA) , Amdocs Ltd. (NASDAQ:DOX) and CDK Global, Inc. (NASDAQ:CDK) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Barracuda Networks is a CA-based security and storage solutions provider. The company has a striking earnings surprise history for the trailing four quarters, having beaten estimates in each of them, for a remarkable average of 525%.

Amdocs is a leading provider of customer care, billing and order management systems for communications and Internet services. The company has a decent earnings history, with an average positive surprise of 2.8%, for the trailing four quarters.

CDK Global provides integrated information technology and digital marketing solutions to the automotive retail industry. The company has an impressive earnings surprise history for the trailing four quarters, beating estimates all through for an average of 9.2%.

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