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3D Systems profit miss, slowing margin growth weigh on shares

By Sruthi Ramakrishnan

(Reuters) - 3D Systems Corp's quarterly profit miss and concerns over slowing growth in its gross margin pushed shares of the 3D printer maker down 11 percent in early trading.

Analysts said 3D Systems may not be able to meet its full-year forecast due to the slowing growth in its high-margin printing materials business.

Revenue from the high-margin print materials rose only 11.8 percent to $29.3 million in the quarter, compared with a 60 percent jump a year earlier.

"People are kind of drawing a line and saying if the mix is going to continue to favor machines over materials, the gross margin increase that you need to actually get to the guidance can be difficult to envision," BB&T Capital Markets analyst Holden Lewis told Reuters.

Gross profit margin expanded 40 basis points to 51.8 percent in the second quarter, compared with 570 basis points to 51.4 percent a year earlier.

The company backed its adjusted earnings forecast of $1.05 to $1.20 per share on revenue of $460 million to $510 million for the year.

Printing material sales usually accompany higher sales of production printers, which analysts estimate sell for between $10,000 and $1 million.

Revenue from 3D printers and other products more than doubled to $54.2 million in the second quarter, primarily on higher sales of professional printer units, the company said.

"The anticipated leverage from higher-margin materials sales is not being expressed in the business model, raising questions regarding utilization rates on new machines," JP Morgan analyst Paul Coster wrote in a note.

Sales of production printers boost demand for printing materials as buyers usually stock up.

Revenue from sales of professional and production printers grew 78 percent in the quarter, Chief Financial Officer Damon Gregoire said on a conference call with analysts.

Net income rose to $9.3 million, or 10 cents per share, in the second quarter, from $8.3 million, or 11 cents per share, a year earlier.

Earnings per share fell in the latest quarter as the number of shares outstanding increased following a public offering in May.

Operating expenses jumped 58 percent jump during the quarter offsetting a doubling in revenue from printers and printed parts.

Excluding items, the company earned 20 cents per share.

Revenue jumped 45 percent to $120.8 million.

Analysts on average had expected earnings of 24 cents per share on revenue of $114.5 million, according to Thomson Reuters I/B/E/S.

Rock Hill, South Carolina-based 3D Systems' shares down 7.3 percent at $46.77 in midday trading on the New York Stock Exchange. The shares have more than doubled in the last year.

Shares of rivals Stratasys Ltd and ExOne Co were also down.

(Reporting by Sruthi Ramakrishnan in Bangalore; Editing by Sriraj Kalluvila)

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