5 Quick Takes On Stratasys' New Earnings Data

In a report published Monday morning, Brean Capital analysts Ananda Baruah and David Ryzhik provided some quick takes on Stratasys, Ltd. (NASDAQ: SSYS)'s fourth quarter earnings. The firm maintains a Hold rating on the stock.

The 3D printer maker preannounced its December quarter EPS and provided guidance for 2015 on February 3.

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Now that the full fourth quarter financial statements are out, the analysts highlight some notable points:

• Organic revenue growth reached 26 percent, year-over-year. The figure surpassed the preannounced growth, but came short of Brean's estimate of 32 percent.
• Core professional organic revenue growth (ex-MakerBot) came in "very healthy," at 29 percent. The analysts commented: "While consistent with our expectations heading into the Dec Q, we'd view the 29% Y/Y core professional organic growth as encouraging, as we believe this ultimately remains the key aspect of the SSYS bull-case (and rightfully so) – given the softer MakerBot results and increased Opex assumptions which underpinned the pullback in the stock following the pre-announcement (and guide) on 2/2/15."
• Cash flow from operating activities came it at $15 million, versus the Street's estimate of $61 million.
• Gross Margins also came in below the Street's expectations of 57.2 percent, at 56.0 percent.
• Consequently, Operating Margins of 11.5 percent were softer than the Street's estimate of 12.8 percent.

The report states: "While it is unclear what led to the Gross Margin miss, we believe the softer GMs can be a function of either: 1) lower MakerBot volume resulting in lower fixed cost absorption, and/or 2) softer Materials (SSYS does not report Materials), for context though, peer DDD (Hold) reported softer Materials growth in their Dec Q (~11% growth vs. our estimate of 28% Y/Y growth). We will look to the call at 8:30 am ET to get more details on the softer Gross Margins."