BofA: 3D Systems Could Remain Under Margin Pressure

3D Systems Corporation (NYSE: DDD) delivered a fourth-quarter EPS beat Thursday, but on the back of lower taxes, according to Bank of America Merrill Lynch.

Gross margins in both materials and services contracted significantly in the quarter.

The Analyst

Analyst Wamsi Mohan maintains an Underperform rating on 3D Systems with an unchanged $10 price target. 

The Thesis

3D Systems reported fourth-quarter revenue of $181 million, in-line with Street expectations. The company noted robust demand across its product suite and across geographies.

Adjusted EPS came in at 10 cents, beating the consensus estimate of 6 cents This was driven by lower taxes, while the company’s margins contracted, Mohan said in a Friday note. 

Higher printer revenue was largely offset by a decline in revenue in material and services, the analyst said. Print material gross margins contracted by 170bps sequentially, while services gross margins were down 370bps.

Positives for the quarter included a good customer response to the NextDent 5100 and new DMP systems, Mohan said. 

The analyst expressed concern regarding the company’s margin trajectory in both the near- and long-term.

BofA lowered its revenue and EPS estimates for F19 from $712 million to $710 million and from 25 cents to 19 cents, respectively.

Price Action

Shares of 3D Systems were falling 13.88 percent to $12.16 at the time of publication Friday. 

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