Why Is Stratasys (SSYS) Down 5.8% Since the Last Earnings Report?

It has been about a month since the last earnings report for Stratasys, Ltd. SSYS. Shares have lost about 5.8% in that time frame, underperforming the market.

Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Stratasys Q1 Loss and Revenues in Line with Estimates

Stratasys reported modest results for first-quarter 2017, wherein the top and bottom lines, both met our expectations. Furthermore, although the top line witnessed a fall, the bottom line improved on a year-over-year basis.

For the first quarter, the company reported adjusted loss per share (excluding amortization, impairment and other one-time items but including stock-based compensation) of $0.02, which came in line with the Zacks Consensus Estimate. Moreover, it marked a significant improvement from a loss of $0.06 posted in the year-ago quarter.

On a GAAP basis, the company reported loss of $0.26 per share compared with a loss of $0.44 per share reported in the year-ago quarter. The year-over-year improvement in bottom-line results came mainly due to the company’s consistent focus on reducing operating expenses which were partially offset by lower revenues.

Quarter Details

Stratasys reported revenues of $163.2 million, which came almost in line with the Zacks Consensus Estimate. However, on a year-over-year basis, the figure declined 2.8% mainly due to fall in Product and Services revenues.

Segment wise, Product revenues were down 3% from the year-ago quarter to $115.1 million mainly due to an 11% decline in System sales, which was affected by a shift in product mix toward lower-end system. Revenues from Services fell 2% year over year to $48.1 million.

Stratasys’ adjusted gross margin (excluding amortization and other one-time expenses but including share-based compensation) contracted 380 basis points (bps) to 50.8%, primarily due to shift in sales mix.

The company’s adjusted operating expenses decreased 11.4% year over year to $82.7 million, primarily due to the company’s continuous focus on improving efficiencies. Also, as a percentage of revenues, operating expenses went down year over year from 55.6% to 50.7%. The decrease was primarily due to lower research and development expenses, and selling, general and administrative expenses. The company posted adjusted operating loss of $0.8 million in the reported quarter compared with adjusted operating loss of $2.8 million reported in the year-ago quarter.

The company exited the quarter with cash and cash equivalents and short-term bank deposits of $297.2 million compared with $280.3 million in the previous quarter. Inventories came in at approximately $116 million compared with $117.5 million in the previous quarter. Long-term debt as of Mar 31, 2017 came in at $21.4 million. The company generated $25.4 million of cash flow from operations during the quarter.

Guidance

Stratasys reiterated its full-year 2017 outlook. The company still expects revenues in the range of $645–$680 million (mid-point $662.5 million). The Zacks Consensus Estimate is pegged at $668.9 million. Non-GAAP income per share is projected between $0.19 and $0.37. Furthermore, the company still anticipates non-GAAP operating margin to be in the range of 3–5%. Capital expenditure is estimated in the range of $40–$50 million, which is in line with the previous guidance range.

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed a downward trend in fresh estimates. There have been two revisions higher for the current quarter compared to three lower.

Stratasys, Ltd. Price and Consensus

Stratasys, Ltd. Price and Consensus | Stratasys, Ltd. Quote

VGM Scores

At this time, Stratasys' stock has a strong score of 'A' on both growth and momentum front. However, the stock was allocated a grade of 'D' on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of 'B'. If you aren't focused on one strategy, this score is the one you should be interested in.

Zacks' style scores indicate that the company's stock is suitable for growth and momentum investors.

Outlook

While estimates have been broadly trending downward for the stock, the magnitude of these revisions has been net zero. Notably, the stock has a Zacks Rank #3 (Hold). We are looking for an inline return from the stock in the next few months.

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