Why 3D Systems Corporation Jumped After Earnings

By Markets Fool.com

Image source: 3D Systems.

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What: Shares of 3D Systems (NYSE: DDD) were sharply higher on Wednesday after the companyannounced its second-quarter earnings before the market opened. At one point during the trading session, 3D Systems' stock was over 20% higher.

So what: In the second quarter, 3D Systems' revenue fell 7% year over year to $158.1 million, which translated to a GAAP net loss of $0.04 per share and a non-GAAP profit of $0.12 per share. Compared to the first quarter, revenue increased by 3.6%. The sequential increase in revenue may be the reason why investors are bidding up the stock, as it could be an early indication that the slowdown in customer demand it's experienced since early 2015 may have begun to stabilize.

Overall, strength from 3D Systems' materials, software, and healthcare solutions sales helped offset the impact of continued weakness from its core 3D printing hardware business. Specifically, its printer sales fell 30% year over year, which fell at an accelerated rate from the first quarter's 17% annual fall.

3D Systems reduced costs across the board, which led to improved gross margins and smaller operating loss. Second-quarter gross profit margin increased 300 basis points year over year to 50.9%, while operating expenses fell 20.2% year over year to $80.4 million. Its operating loss narrowed from $23.8 million last year to $3.7 million this year.

Now what: While there were several aspects of 3D Systems' earnings that suggest the company is making notable improvements in its business, its diversified business model masked the reality that its core 3D printer business deteriorated further. Unfortunately, without a notable improvement in 3D printer sales, which drives the long-term sale of consumables and materials, it doesn't seem likely that 3D Systems' business is anywhere near a full recovery.

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Steve Heller owns shares of 3D Systems. The Motley Fool recommends 3D Systems. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.