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3D Systems: Citi Says To Expect More Pain Before Any Gains

3D Systems: Citi Says To Expect More Pain Before Any Gains
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Analyst: 3D Systems Is Making The Right Moves

3D Systems Corporation (NYSE: DDD) reported its 1Q16 revenue short of expectations. Citi’s Kenneth Wong maintained a Sell rating for the company, while reducing the price target from $15 to $12. The analyst commented that 3D Systems’ fundamentals continued to be soft, and could get even softer going ahead.

3D Systems posted Q1 revenues of $152.6M, below the Citi estimate of $154M and the Street expectation of $155.9M. The company’s revenue was adversely impacted by a 24 percent decline in printer sales, Wong mentioned.

Related Link: Citi Previews 3D Printing Q1 Earnings: 'Sentiment Tracking Ahead Of Fundamentals'

The revenue shortfall, along with an $8M sequential increase in G&A, put operating margins under pressure. Operating margins came in at 3.1 percent, versus Street estimate of 6.2 percent. 3D Systems’ EPS 05 was in-line with expectations, but this was on account of a tax benefit.

Fundamentals Could Worsen

Competitive pressure continued on the professional segment, especially SLA. “We expect this to continue into the foreseeable future with the SLA and SLS market facing the consumerization pressures FDM has been facing,” Wong wrote.

The analyst further expressed concern regarding the accelerated rate of declines in the on-demand parts business, which is facing tougher comps in Q2.

“Management’s inability to provide guidance reinforces our concerns that a recovery will take longer than investors expect,” Wong added.

Latest Ratings for DDD

Aug 2017JP MorganUpgradesUnderweightNeutral
Jul 2017Loop CapitalInitiates Coverage OnHold
Jul 2017SusquehannaInitiates Coverage OnNeutral

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