Stock to Avoid: The ExOne Company - Analyst Blog

Zacks Investment Research downgraded The ExOne Company XONE to a Zacks Rank #5 (Strong Sell) on Jun 21, 2014. Going by the Zacks model, companies holding a Zacks Rank #5 have strong chances of performing worse than the broader market.

Why the Downgrade?

ExOne reported a disappointing result for first-quarter 2014 on May 14, leading to a 21% fall in the share prices the next day. The company reported net loss of 38 cents per share, worse compared with the loss of 20 cents per share in the year-ago quarter and the Zacks Consensus Estimate of a loss of 14 cents per share.

Revenues decreased 8% year over year due to 42.9% fall in revenues generated from 3D Printing Machines & Micromachinery sales, which was, however, partially offset by 32.4% increase in the sales of 3D Printed Products, Materials and Other Services. The decline in revenues and an 11% hike in cost of sales led to a 43% drop in gross profit. Gross margin was at 22.2%, down 1360 basis points year over year.

ExOne's operating expenses, including research and development as well as selling, general and administrative expenses increased 59.2% year over year. Operating loss came in at $5.4 million versus $1.6 million recorded in the year-ago quarter.

Lackluster results triggered downward revisions in the earnings estimates for ExOne . Over the last 60 days, the Zacks Consensus Estimate of a loss of 18 cents per share has gone up to a loss of 39 cents per share for 2014 while for 2015, the earnings estimate has shrunk from 24 cents per share to 14 cents per share.

Unfavorable revision in earnings estimates as well as a negative average earnings surprise of 828.6% has made us dubious about The ExOne Company's performance in the quarters ahead.

Other Stocks to Consider

ExOne has a $502 million market capitalization. Some better-ranked stocks in the machinery industry include Gorman-Rupp Co. GRC, Blount International Inc. BLT and Nordson Corporation NDSN. While Gorman-Rupp sports a Zacks Rank #1 (Strong Buy), both Blount International and Nordson hold a Zacks Rank #2 (Buy).

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