3D Systems Corporation (DDD) stock has had a tough year. Going into Thursday’s first-quarter earnings, shares of the 3D printing company were down 42% since early May one year ago. But recently, DDD stock has been showing signs of life, with shares soaring 66% year-to-date as markets realized they’d probably been a little too tough on the company.
However, investors aren’t nearly so sanguine about the company’s prospects after 3D Systems’ Q1 report, which was relatively unremarkable. Earnings per share came in as expected, but revenue didn’t, and the company didn’t offer guidance.
Overall, not a whole lot to go on, and DDD stock owners didn’t care for that. Shares were down more than 3% in early trading.
DDD Stock: Transitioning Away From Consumers
Analysts expected DDD to report non-GAAP earnings of 5 cents per share, which would’ve been flat year-over-year, and that’s precisely what the company reported. Revenue, however, was a bit of a disappointment — even though no one was expecting much.
Wall Street expected revenue to fall 2.8% year-over-year to clock in at $156.3 million. Instead, revenue came in short of that at $152.6 million, down 5% from Q1 2015. It’s no surprise DDD stock isn’t rocketing higher on the news.
Are there caveats, though? Yes.
Excluding the consumer segment as well as products and services the company no longer sells, revenue was down just 2%. Far more importantly, DDD has a new leader — the former head of HP Inc’s (HPQ) printing business, Vyomesh Joshi. Said Joshi:
“I will be focusing on improving quality, reliability and supply chain. The next phase for us is to develop a strategy to drive profitable growth with operational excellence and an appropriate cost structure.”
It’s clear from the numbers (and an explicit statement in the earnings slideshow) that DDD is shifting away from consumers, which is probably healthy. At the end of the day, there’s only so many hobbyists looking to build Batman replicas that you can sell to.
Printer sales were down 24% year-over-year, but off just 17% when you excluded the consumer segment. On demand manufacturing services revenue also fell 15%. But what should console DDD stock owners are the increases in software (+22%) and healthcare (+12%) revenues the company posted.
Gross profit margin is also up from a year ago, advancing 170 basis points from 49.1% to 50.8%. The largest improvement in gross margin was seen in the materials division, where “sales mix and supply chain improvements” helped to fuel the higher figure.
With that in mind, you can see why Joshi is making supply chain a priority.
Still, with nothing stellar to report, and after such an incredible rally in 2016, it’s not hard to see why DDD stock is off slightly today.
It will be interesting in the quarters and (hopefully) years ahead to see whether the new CEOs vision can galvanize some real, impactful changes at the company.