Report
Danny Goode
EUR 850.00 For Business Accounts Only

Morningstar | Printer Jams on 3D Systems' First-Quarter Results, but We're Maintaining Our Fair Value Estimate

We are maintaining our $11 fair value estimate for 3D Systems following disappointing first-quarter results. Compared with the first quarter last year, 3D’s top line declined 8% while gross profit margins contracted 400 basis points versus the same period. The first quarter’s 43% gross profit margin was also 300 basis points worse than the fourth quarter in 2018. Management pinned performance in the quarter on weaker sales on a battery of issues, including weak on-demand manufacturing sales, weaker demand from Europe’s automotive sector, and a technical issue with the powder management systems for its DMP Factory 350 systems. Management touted printer unit growth of 90%, but first-quarter results suggested lower-end printer sales dominated the volume mix and pricing remained lackluster.

With operating income challenged during the quarter at negative $21 million, management plans to improve its cost structure and enhance higher margin product offerings. 3D Systems listed operating expense reduction of around $13 million for the year. Management also planned to improve profitability by exiting the entertainment business, but stopped short of mentioning how margin accretive this move is.

Details surrounding full-year guidance were light, but management plans to ramp sales of its DMP printers after technical enhancements for the units’ powder management systems. 3D also issued plans for stronger materials growth in the second half of 2019, partially on the back of new materials for plastics. We lowered our top-line revenue growth in printer sales to account for increased growth in lower-priced printer sales. According to 3D, unit sales were up 90% during the quarter, but this didn’t translate into top-line improvements because of low average selling prices. We model a slight top-line decline below 1% in 2019 but with gross profit margins near 45% on higher materials sales.
Underlying
3D Systems Corporation

3D Systems is a holding company. Through its subsidiaries, the company provides 3D printing solutions, including 3D printers for plastics and metals, materials, software, on demand manufacturing services and digital design tools. The company's solutions support applications in a range of industries and verticals, including healthcare, aerospace, automotive and durable goods. The company's healthcare capabilities include simulation, Virtual Surgical Planning (VSP?), and printing of medical and dental devices, models, and surgical guides and instruments. The company provides 3D printing technologies including Stereolithography, Selective Laser Sintering, Direct Metal Printing, MultiJet Printing and ColorJet Printing.

Provider
Morningstar
Morningstar

Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.

Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.

We have operations in 27 countries.

Analysts
Danny Goode

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