3D Printing,2Q16Earnings Preview:Sale Trends Still Eroding;Product Related Catalysts Ahead?

Sales still taking a beating; New product reinforcement on the way? — Wekeep waiting for inputs to bottom, but commentary from peers and industry partnersreinforce concerns back in April (DDD: Downgrading to Sell and SSYS:Downgrading to Neutral). Our conversations with partners indicated macrouncertainty stalled larger transactions at the end of Q2 and beyond. Severalinternational resellers indicated some deals were being reevaluated on currencyrelated pricing concerns. Market stagnation has lasted longer than most expectedand we believe management teams may need to augment cost cutting initiatives tofuel some market growth. We do see some short term catalysts ahead with bothSSYS and DDD announcing product events in the coming two months. Also, theIMTS conference (Sep 12-15) could produce positive data points.

    Stratasys: Fresh CEO, fresh product could offset stale business inputs — Weexpect Q2 to come in below our $173M estimate with flat Q/Q ($168M) a betterbenchmark. Our conversations with partners suggest sales trends that were worsethan they anticipated going into the quarter. We expect costs cuts to offset softersales and believe our $0.04 is still attainable, but do see some risk to consensusestimate of $0.06. With the retirement of CEO, David Reis we expect investors zeroin on incoming CEO, Ilan Levin’s perspective on how to spark growth while reiningin costs. We also expect a lot of questions around the announced product event onAugust 23rd, but we are not expecting meaningful details. Investors have beenlonging for the announcement of metals capabilities and commentary suggestingsuch would be viewed favorably. We do not anticipate changes to FY16 revenueoutlook ($700-730M), but believe the wide EPS target ($0.17-0.43) could see thefloor raised. Q2 call is set for Aug. 4th at 8:30am ET (855) 319-2216 / 45898366).

    3D Systems: Cost cutting should offset weaker sales — Our industry checksagain came back negative which was expected considering the market environmentand heightened macro uncertainty. We heard from some partners that the loomingHP offering has led some to pause sales to evaluate alternatives. We believerevenue is biased to come in below consensus ($161M) and more likely toapproach our forecast ($155M). We still expect to see leverage in the model andexpect earnings to track our $0.08 estimate. DDD recently announced a productevent at IMTS in Sep which could be viewed as a catalyst. Q2 call is scheduled forAug. 3th at 8:30am ET (877-407-8291).

    voxeljet: Europe exposure, expensive printers elevate risks — We believethere is heightened risk around our ?7M revenue estimate and guidance (?6.5-7M)due to macro uncertainty and big deal exposure. European vendor Arcam sawmassive deal slippage and our research suggests big ticket purchases have stalled.

    We do expect some offset to come from better utilization in the US facility. Thecompany has not yet announced their Q2 earnings date.