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Stratasys: Flat Outlook Offsets Strong Profits

Our revised fair value estimate reflects an improving product mix, expense control, and cash flow balanced by continued weakness in the market for 3-D printing products and services.

We reduced our fair value estimate for no-moat

Fourth-quarter adjusted EPS of $0.15 (versus a loss of $0.01 one year ago) excludes numerous non-GAAP adjustments totaling $22.6 million after-tax, or $0.45 per diluted share. Slightly higher sales were aided by stronger gross margins (a richer product mix) and lower selling, general, and administrative expenses. Adjusted operating income of $11.6 million rose more than $20 million over an adjusted operating loss in the prior year.

Management established 2017 guidance ranges for revenue of $645 million-$680 million and adjusted net income of $10 million-$20 million (excluding roughly $63 million after-tax in mainly non-cash adjustments). We modestly raised our forecast 2017 gross margins, which is largely offset by less favorable tax treatment. Gross margins benefited from initial sales of the company’s high-end J750 multi-color, multi-material printers.

Quarterly results contained signs of stability, if not a rebound to notable growth. Fourth-quarter revenue rose 1% year over year to $175 million and rose 12% sequentially. Products sales rose 2% to $127 million, while Service revenue fell 1% to $49 million. Within Services, year-over-year sales of high-margin consumables rose 11%, and customer support revenue rose 8%.

Importantly, the company continues to develop new products, including higher-performance materials for both its FDM and Polyjet printers. It remains pleased with initial demand for its new J750 printer, its most significant new product introduction.

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About the Author

David Silver

Senior Equity Analyst

David Silver, CFA, CPA, is a senior equity analyst for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. He covers diversified industrials, including producers of industrial gases, engineering and construction services, electronic materials, pumps and valves, and professional staffing.

Before joining Morningstar in 2014, Silver spent approximately 20 years covering the chemicals sector as a sell-side analyst for Merrill Lynch, J.P. Morgan Securities, Credit Suisse, and Wertheim Schroder.

Silver holds a bachelor’s degree in accounting and finance from The Wharton School of the University of Pennsylvania and a master’s degree in business administration, with a major in finance, from the University of Chicago Booth School of Business. He also holds the Chartered Financial Analyst® designation and is a Certified Public Accountant.

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