What's In The Offing For 3D Systems (DDD) In Q1 Earnings?

3D Systems Corporation (NYSE:DDD) is scheduled to report first-quarter 2018 results on May 2, before the market opens. The question lingering in investors’ minds is whether or not this 3D printing solution provider will be able to post a positive earnings surprise in the quarter.

The company has a dismal earnings surprise history, with earnings missing estimates by a wide margin, in three out of the trailing four quarters. However, in the last-reported quarter, it posted a positive earnings surprise of a whopping 400%. This resulted in an average positive surprise of 9.9% for the last four quarters.

Let’s see how things are shaping up prior to this announcement.

What the Zacks Model Unveils?

Our proven model does not conclusively show that 3D Systems is likely to beat earnings 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 at least 3 (Hold) for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

It should be noted that stocks with a Zacks Rank #4 or 5 (Sell rated) are best avoided, especially when the company is seeing negative estimate revisions.

3D Systems carries a Zacks Rank of 3 and has an Earnings ESP of 0.00%, which makes surprise prediction difficult. Furthermore, it should be noted that the Zacks Consensus Estimate for first-quarter earnings remained unchanged over the past 30 days.

The Zacks Consensus Estimate for the first quarter is pegged at a penny, representing year-over-year slump of 83.3%. Additionally, analysts polled by Zacks project revenues of roughly $158.8 billion, up 1.5% from the year-ago quarter figure.

3D Systems Corporation Price and EPS Surprise

Factors at Play

For the past few quarters, 3D Systems has been experiencing unfavorable broader market conditions which have affected its financial performance. Macroeconomic factors such as economic slowdown, inflation, currency fluctuations, commodity prices and credit availability have dampened the company’s performance. In the prior quarter, revenues from 3D printing products and services were almost flat year over year. In full-year 2017, total printer revenues slipped 7%. We believe the aforementioned problems still persist, which is likely to have adversely impacted 3D Systems’ first-quarter performance.

In addition, the company’s high operating and acquisition costs are anticipated to continue hurting its near-term operating income performance. Further, the company believes investment in IT and go-to-market initiatives will result in elevated expenses, consequently restricting near-term operating income growth.

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. (NYSE:HPQ) and General Electric Company (NYSE:GE) has shaken things up in the industry, and remains a concern for 3D Systems.

Nonetheless, the company’s focus on strengthening its foothold in the 3D printing industry is expected to provide a favorable long-term opportunity. As a matter of fact, majority of 3D Systems customers are shifting from prototyping to end-use production using 3D printing technology, and the company believes it is well positioned to aid customers in their transition. In addition to this, demand for production printers, materials and software is expected to have been a major catalyst, stoking growth.

Furthermore, 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. We believe the new offerings, along with high demand for printers and materials from medical and dental customers, to have bolstered the healthcare business top line in the soon-to-be-reported quarter as well.

A Stock With a Favorable Combination

Seagate Technology PLC (NASDAQ:STX) is a stock you may want to consider as our model shows that the company has the right combination of elements to post an earnings beat.

Seagate has an Earnings ESP of +3.43% and flaunts a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

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