Stratasys (SSYS) Up 12.3% Since Last Earnings Report: Can It Continue?

Core Viewpoint - Stratasys reported a mixed performance in its Q3 2024 earnings, with a slight earnings beat but a significant decline in revenues year-over-year, raising questions about future performance leading up to the next earnings release [1][2][3]. Financial Performance - Q3 2024 earnings were 1 cent per share, surpassing the Zacks Consensus Estimate of a loss of 2 cents per share, but down from non-GAAP earnings of 4 cents per share in the same quarter last year [2]. - Quarterly revenues fell 13.6% year-over-year to $140 million, missing the consensus mark by 3.08%, primarily due to macroeconomic factors affecting customer capital equipment spending [3]. - Product revenues decreased by 16.9% to $94.1 million, with System revenues plummeting 38.4% to $31.7 million, while Consumables revenues slightly increased by 1% to $62.4 million [4]. - Service revenues declined 6.1% to $45.9 million, although Customer Support revenues grew by 1.3% to $31 million [4]. - Non-GAAP gross profit fell 8.8% to $69.5 million, but the non-GAAP gross margin improved by 130 basis points to 49.6% [5]. Operating Expenses and Losses - Non-GAAP operating expenses decreased by 6.1% to $69.6 million, resulting in a non-GAAP operating loss of $0.1 million compared to a profit of $4.1 million in the previous year, with the margin contracting by 260 basis points to negative 0.1% [6]. - Adjusted EBITDA dropped 47.9% to $5.1 million [6]. Product Developments - The company experienced growth from new product launches, including Origin 2 and Stratasys Neo Build Processor, which expanded manufacturing applications and use cases [7]. - Strong demand was noted for offerings like F3300 and TrueDent, with the F3300 platform delivering high-quality thermoplastic parts [8]. Balance Sheet and Cash Flow - Stratasys ended Q3 with cash and short-term deposits of $143.95 million, down from $150.9 million in the previous quarter, and reported an operating cash outflow of $4.5 million, an increase from $2.4 million in the prior quarter [9]. 2024 Outlook - For 2024, management projects revenues between $570 million and $580 million, with non-GAAP earnings per share expected in the range of 3-7 cents [10]. - Gross margins are anticipated to be between 49% and 49.2%, and non-GAAP operating margins are expected to range from 0.6% to 1.3% [10]. - Operating expenses are estimated to be between $276 million and $278 million, with adjusted EBITDA projected at $25 million to $28 million [11]. Market Sentiment - The consensus estimate for Stratasys has shifted down by 33.33% recently, indicating a flatlining of estimates over the past month [14][15]. - Stratasys holds a Zacks Rank 2 (Buy), suggesting expectations for above-average returns in the coming months [17].