What Can Investors Expect From Stratasys's Earnings?

| About: Stratasys, Inc. (SSYS)

Stratasys Inc. (NASDAQ:SSYS) is set to report FQ4 2013 earnings before the market opens on Monday, March 3rd. Stratasys will be the second of the 2 big 3-D printing companies reporting earnings within a 4-day stretch. In 2013, 3-D printing stocks were all the rage and Stratasys returned an impressive 61%. 3-D printing, also known as additive manufacturing is the process of creating physical objects from computer file blueprints in layer by layer process from the bottom up. A wide range of potential applications for the technology exist from use to create custom food and desserts, biosynthesize human organs for transplants, to building prosthetic limbs more cheaply and the possibilities go on.

Stratasys's, rival 3D Systems (NYSE:DDD), reported their earnings Friday and announced lower profit and sales than expected, but still accomplished 52% year over year revenue growth and laid out plans to double sales in 2014. Investors reacted positively to the news and shares of DDD were up 4% in early trading Friday. This quarter Wall Street is expecting SSYS to report even higher growth than DDD, 112% revenue growth is predicted compared to FQ4 last year. Here's what investors expect from SSYS on Monday.

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 Stratasys)

The current Wall Street consensus expectation is for SSYS to report 49c EPS and $150.72M revenue, while the current Estimize.com consensus from 15 Buy Side and Independent contributing analysts is 49c EPS and $151.33M in revenue. This quarter the buy-side as represented by the Estimize.com community is expecting Stratasys to report in-line with Wall Street expectations on EPS but beat revenue estimates by a small margin.

Over the previous 6 quarters the consensus from Estimize.com has been more accurate than Wall Street in predicting Stratasys's EPS and revenue 5 and 4 times respectively. 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 very small differential between the two groups.image

The distribution of estimates published by analysts on the Estimize.com platform range from 45c to 52c EPS and $145.00M to $156.50M in revenues. This quarter we're seeing an average to wide distribution of estimates for Stratasys.

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, which could mean greater volatility post earnings.image

Over the past 4 months the Wall Street EPS consensus decreased from 51c to 49c while the Estimize consensus increased from 47c to 49c. Over the same period of time the Wall Street revenue consensus rose from $143.49M to $150.72M while the Estimize consensus increased from $149.27M to $151.33M. Timeliness is correlated with accuracy and at the end of the period we saw rising revenue expectations, which are often a bullish indicator and sales growth is a key metric in a developing industry.image

The analyst with the highest estimate confidence rating this quarter is BB9166, who projects 50c EPS and $152.00M in revenue. BB9166 self identifies as a hedge fund professional and touts an impressive record this season of being more accurate than Wall Street 59% of the time on EPS and 58% of the time on revenue. In the Winter 2014 season, BB9166 is rated as the 22nd best analyst and is ranked 49th 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, BB9166 is making a bullish call expecting Stratasys to beat the Estimize consensus on both EPS and revenue.

3-D printing technology has been around since the first 3-D printing device was built by Chuck Hull of 3D Systems back in 1984. Last year we saw accelerated growth in the sector and expectations for 2014 are looking lofty already. 3-D printing is the type of technology that has the potential to revolutionize the way things are manufactured. Stratasys's 2014 outlook in tomorrow's report may tip off investors if another year of doubling revenue lies ahead.

Disclosure: None

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Tagged: , Computer Peripherals, Earnings
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