Will 3D Systems Conjure Up A Treat For Investors?

Feb.27.14 | About: 3D Systems (DDD)

3-D printing stocks were all the rage in 2013 (3D Systems stock was up 142%), but 3-D printing is nothing new. In fact it’s been around since Chuck Hull of 3D Systems Corp. (NYSE:DDD) built the first 3-D printer back in 1984. Since then the industry has come a long way and innovator’s are dreaming up new ways to use the process of additive manufacturing to transform the world. Organovo (ONVO) is attempting to 3-D print human liver replacements and 3D Systems just launched ChefJet and ChefJet Pro for, you guessed it, 3-D printing delicious treats. Cupcakes and biosynthesizing organ replacements are just the tip of the iceberg, other potential applications of 3-D printing technology include cheap prosthetic limbs and 3-D printing replacement parts on board space stations using a limited supply of stock material. The sales expectations for 3D Systems are high this quarter as Wall Street is expecting 53% revenue growth compared to the same period last year. DDD is set to report FQ4 2013 earnings before the market opens on Friday, February 28th, here’s what investors are expecting.

The information below is derived from data submitted to the Estimize.com platform by a set of Buy Side and Independent analyst contributors.image

(Click Here to see All Estimates for 3D Systems)

The current Wall Street consensus expectation is for DDD to report 22c EPS and $155.09M revenue, while the current Estimize.com consensus from 32 Buy Side and Independent contributing analysts is 29c EPS and $155.17M in revenue. This quarter the buy-side as represented by the Estimize.com community is expecting 3D Systems to beat the Wall Street consensus by 7c EPS and a tiny margin on revenue.

By tapping into a wider range of contributors including hedge-fund analysts, asset managers, independent research shops, students, and non professional investors Estimize has created a data set that is up to 69.5% more accurate than Wall Street, but more importantly it does a better job of representing the market’s actual expectations. It has been confirmed by an independent academic study from Rice University that stock prices tend to react with a more strongly associated degree to the expectation benchmark from Estimize than from the Wall Street consensus.

The magnitude of the difference between the Wall Street and Estimize consensus numbers often identifies opportunities to take advantage of expectations that may not have been priced into the market. In this case, we are seeing a wide differential on EPS.image

The distribution of estimates published by analysts on the Estimize.com platform range from 19c to 36c EPS and $149.00M to $159.58M in revenues. This quarter we’re seeing a wide distribution of estimates for 3D Systems.

The size of the distribution of estimates relative to previous quarters often signals whether or not the market is confident that it has priced in the expected earnings already. A wider distribution of estimates, signaling less agreement in the market, could mean greater volatility post earnings.image

Over the past 4 months, the Wall Street EPS consensus decreased from 33c to 22c while the Estimize consensus dropped from 33c to 29c at the end of the period. Over the same period of time, the Wall Street revenue consensus rose from $146.83M to $155.09M while the Estimize consensus increased from $143.75M to $155.17M. Timeliness is correlated with accuracy and at the end of the period we saw rising revenue expectations but falling EPS consensuses from both groups.image

The analyst with the highest estimate confidence rating this quarter is anmikyoso who projects 33c EPS and $154.84M in revenue. In the Winter 2014 season, anmikyoso is rated as the 35th best analyst and is ranked 31st overall among over 3,950 contributing analysts. Estimate confidence ratings are calculated through algorithms developed by deep quantitative research which looks at correlations between analyst track records and tendencies as they relate to future accuracy. In this case, anmikyoso is expecting 3D Systems to beat the Estimize consensus on EPS but come up less than $1 million shy on revenue.

3-D printing was a huge sector of growth in 2013. The technology has been around for a long time but 3D Systems will have to get in gear and meet the high expectations from contributing analysts on the Estimize.com platform to maintain current levels of valuation. This quarter, the Estimize community is expecting DDD to edge past Wall Street expectations in revenue and beat EPS expectations by 7c per share.

Disclosure: None.