3D Systems (DDD, Financial) recently released its results for the second quarter. The company posted a good increase in revenue, but the numbers were not impressive as they fell shy of analysts’ estimates. This led the stock to fall by more than 12%. 3D Systems posted a good 25% growth in quarterly revenue. But the revenue fell short of analysts’ expectations of $161.9 million. The company did see good demand for its printers which are driving its sales.
3D Systems’ unit sales for design and manufacturing printers increased by 126% and helped it fuel a 30% increase in materials revenue altogether.
Good growth
3D Systems is growing, as it is evident from a good improvement in its top line. But the fact that the company failed to meet analysts’ estimates reveals that 3D Systems might be overvalued. If we look upon the industry as a whole, almost all the companies in the league such as ExOne and Stratasys were down in the same week 3D Systems released its results. So, getting away from the stock just on the basis of analysts’ estimates would be a hasty decision. 3D Systems has definitely got much steam for a good performance. It is also working on various initiatives to improve its profitability.
3D Systems is seeing higher demands for its metal printers and is expected to increase in the days to come. The polymer printers are also seeing good increase in bookings that are strengthening its long-term prospects. To make it more effective and to improve the user experience, 3D Systems has also postponed the shipment of its new consumer product. This, however, will shrink its margins in the organic segment, but in the long run this will be a primary growth driver for the company.
The healthcare segment has remained a profitable venture for 3D Systems. It is expanding its user base and products. 3D Systems is laser focused on expanding its digital threads in personalized medical services. Under this objective the company acquired Medical Modeling which added virtual surgical planning, guiding and 3-D printing of medical devices. This was a smart move by the company as it is seeing good outputs from the same. In addition, 3D Systems has also announced the acquisition of Simbionix, a leading provider of the 3-D virtual reality surgical simulation and training product. This is expected to accelerate its moves towards profitability.
Product portfolio improvements
3D Systems is also strengthening its portfolio of products. It has new consumer products planned for later in the year. It has been seeing growth in the demands of new CubePro printer and iSense scanner and with the launch of new products in the next half of the year 3D Systems is expecting a higher consumer revenue contribution in the second half of the fiscal year.
Besides these initiatives, 3D Systems is focused on advancing its leadership in key verticals through its investment strategy. It is making meaningful investments in R&D, sales and marketing. This strategy is helping the company to accelerate product development and drive innovations across its entire product category. In addition, 3D Systems has also added several major distributors such as ScanSource (SCSC, Financial) , Konica Minolta (KNCAY, Financial) and Cannon Marketing Japan and is expecting to contribute meaningfully for future growth.
3D Systems has also ramped up the development of its continuous high speed fab-grade 3D printer platform and related polymer and conductive materials development. The company is convinced with the prospects that this advanced manufacturing platform can significantly increase 3D printing production speeds and successfully address the needs of many industrial and consumer goods companies.
Conclusion
3D Systems is making impressive efforts by investing in R&D which are expected to yield results later. Hence, 3D Systems can be a good long term holding. So, investors should definitely consider including 3D Systems in their portfolio.
