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3D Printer Market Braces For Earnings From 3D Systems Amid Tumult

3D Systems ( DDD ) is set to report first-quarter earnings Thursday, followed by rival Stratasys ( SSYS ) next Monday, likely providing a clearer indication of whether the runup in both stocks this year — or the more recent downturn — is justified. The consensus on 3D Systems is for revenue of $156.3 million, down 3% year over year, and earnings per share minus items of 5 cents, flat, as polled by Thomson Reuters. Shares of 3D Systems and Stratasys were hammered in 2015, as both posted quarter after quarter of disappointing earnings and sales. Stratasys stock, however, has nearly doubled since hitting a six-year low of 14.88 three months ago, and 3D Systems has more than doubled since hitting a five-year low of 6 three months ago. Both stocks, though, have faded in the past week. And 3D Systems shares were near 15, down 3%, in midday trading in the stock market today . Stratasys stock, too, was down nearly 3% midday Wednesday, near 22. The rise of both stocks most of this year was partly fueled by Q4 earnings from both companies that beat expectations, raising hopes the top-two 3D printer makers are poised for a rebound. But 3D Systems and Stratasys executives took a cautious tone about the road ahead. 3D Systems got a bounce when it announced Vyomesh Joshi as CEO on April 4. Joshi had been executive vice president of the imaging and printing business of HP Inc. ( HPQ ), formerly part of Hewlett-Packard before its split. HP plans to enter the 3D printer market this year. Needham analyst James Ricchiuti last week lowered his rating on 3D Systems to hold from buy, “as shares might be pricing in too much,” he wrote. “Notwithstanding solid sequential improvement in Q4 from the publicly traded 3D printing companies, we believe business remains challenging, compounded by the normal seasonal weakness experienced in the March quarter,” Ricchiuti wrote. 3D printer makers  ExOne ( XONE ) and Voxeljet ( VJET ) are set to report earnings on May 11 and May 13, respectively, both before the market open.

Have 3D Systems, Stratasys Stocks Traveled Too Far Too Fast?

With a strong leap in the stock prices of 3D Systems ( DDD ) and Stratasys ( SSYS ), some analysts question if the rise was too far too fast. Needham analyst James Ricchiuti on Tuesday lowered his rating on 3D Systems to hold from buy, saying further upside in the stock over the near term will be challenging. He says the turnaround at 3D Systems should be more gradual than the market is anticipating. It follows a recent downgrade of 3D Systems and Stratasys from Citi based on stock price valuations of both companies. Shares of 3D Systems and Stratasys were hammered in 2015 as both posted quarter after quarter of disappointing earnings and sales. This year, Stratasys stock has nearly doubled since hitting a six-year low of 14.88 three months ago. 3D Systems has nearly triple since hitting a five-year low of 6 three months ago. “3D Systems shares are now above our 12-month target price,” Ricchiuti wrote in a research note. “With the stock trading at 32 times our 2017 EPS estimate, the market appears to be pricing healthy upside to estimates.” The rise of both stocks were partly fueled by the Q4 earnings reports of both companies that beat expectations, suggesting the worst might be over and raising hopes the top two 3D printer makers are poised for a rebound. But that wasn’t the message that 3D Systems and Stratasys tried to signal, as comments from company executives during the conference call were of a cautious tone about the road ahead. 3D Systems got a further bounce when it announced Vyomesh Joshi as CEO on April 4. Joshi had been executive vice president of the imaging and printing business of HP Inc. ( HPQ ), formerly Hewlett-Packard before its split. HP plans to enter the 3D printer market this year. 3D Systems stock was near 18, down 2%, in afternoon trading in the stock market today . Stratasys was trading near 26, up a fraction. 3D Systems is set to report first-quarter earnings on May 5 and Stratasys on May 9, both before the market open. The consensus on 3D Systems is revenue of $156.3 million, down 3% year over year, and earnings per share minus items of 5 cents, flat, as polled by Thomson Reuters. Stratasys sales are seen rising 4.5% to $164.8 million as it swings to a 4-cent per-share loss from a 4-cent profit. “Notwithstanding solid sequential improvement in Q4 from eight of the publicly traded 3D printing companies, we believe business remains challenging compounded by the normal seasonal weakness experienced in the March quarter,” Ricchiuti wrote.

Xerox Stock Rebuilds; Q1 EPS Rise Expected, But Not Better Revenue

Take your eye off iconic copier maker Xerox ( XRX ) for too long — heck, Xerox stock had done little more than fall since December 2014 — and you would have missed its run-up to Tuesday’s eight-month high at 11.39, up 34% since touching a nearly three-year low in January at 8.48. Xerox stock closed Friday at 11.16, flat for the session. Credit Suisse analyst Kulbinder Garcha doesn’t see much upside potential, giving Xerox a 12-month price target of 11 and a neutral rating in a research note issued Friday. He does see more first-quarter earnings in Xerox, modeling 1 cent more adjusted EPS than Wall Street’s 23-cent consensus, which would be up 10% from the year-earlier quarter. Xerox is scheduled to release Q1 earnings before Monday’s open. But Garcha sees slightly smaller sales than the $4.24 billion consensus of analysts polled by Thomson Reuters. That Q1 consensus would be a 5.1% decline from 2015’s Q1 sales and Xerox’s 17th consecutive quarter of shrinking year-on-year revenue, albeit slower shrinkage than the 8% decline in Q4 and 10% contraction in Q3. The rise in Xerox stock may be tied to anticipation over its imminent split into two companies: the legacy copier/printer/office machine business and the business-process outsourcing (BPO) spinoff. Based on $18 billion in 2015 sales, down 8% from 2014, the business-machine side would wind up with about $11 billion a year in sales, and the outsourcing spinoff about $7 billion, Xerox CEO Ursula Burns said when she announced the split on Jan. 29, concurrent with the Q4 earnings release. Inspired by activist investor Carl Icahn, Burns said the breakup would unlock value in both companies. Icahn would get three seats on the new BPO board, while Xerox would get six. BPO sales, grouped currently as services under Xerox, is a “show me story,” Credit Suisse’s Garcha said. “Management is trying to transition the business away from low-margin to more value-added business,” he wrote in a research note. “However, we think management has to show consistent improvement and deliver on results to regain investor confidence.” Garcha anticipates a Q1 decline of 5.4% to $2.4 billion in services revenue. As for the so-called “document technology” core hardware, software and document management businesses, Garcha estimates that about $1.6 billion of Xerox’s annual cost of goods sold are “yen-denominated,” coming from the Fuji Xerox joint venture (75% owned by Fujifilm ( FUJIY )). With the yen up about 9% year to date, foreign exchange “will impact margins,” but less than was earlier expected, Garcha said. For Q1, Garcha forecasts document tech segment revenue fell 12% to $1.6 billion. Not all of Xerox outsourcing will be part of the BPO spinoff. Document outsourcing, which fell 2% to $852 million in Q4 revenue, will stay with the larger portion of the split, a Xerox spokesman told IBD. Effective April 1, Xerox borrowed $1 billion unsecured from a consortium of seven banks to be repaid within a year or upon execution of the spinoff, whichever comes first. Xerox says the spinoff should be complete before year-end. With a market cap of $11.3 billion, Xerox is the fourth-largest member of IBD’s Computer-Hardware/Peripherals industry group, following Canon ( CAJ ), the newly reorganized HP Inc. ( HPQ ), and Fujifilm. Xerox carries a middling 66 IBD Compositing Rating. Its formidable BPO rivals, Cognizant Technology Solutions ( CTSH ) and Infosys ( INFY ) rate better, with CRs of 75 and 80, respectively.