3D Systems Corporation (NYSE:DDD) and Stratasys, Ltd. (NASDAQ:SSYS), leaders in 3D printer market, are confronting a frightening picture in their industry: weakening demand for 3D printers. A recent survey by Piper Jaffray has revealed that 3Q2016 was marked by soft demand for 3D printers produced by 3D Systems and Stratasys.
68 subjects surveyed
The survey by Piper Jaffray collected opinions from some 68 makers and vendors of 3D printers. When it comes to vendors, the survey tried to focus more on resellers closely tied to 3D Systems and Stratasys. As it turned out, the demand for 3D printers was tepid to the point that now Piper Jaffray believes that 3D Systems and Stratasys will both miss their revenue estimated when they report 3Q.
The two makers of 3D printers are slated to report their 3Q earnings around the middle of next month. Though 3D Systems and Stratasys are expected to miss revenue estimates in 3Q, EPS is less threatened thanks to cost-cutting that has been going on in the companies.
Entry of HPQ complicates the picture
The entry of HP Inc (NYSE:HPQ) into 3D printer manufacturing business is complicating the picture for 3D Systems and Stratasys. HPQ is expected to start shipping its 3D printers later this year and many customers have held off their purchases of 3D printers until HPQ brings its version to market. That explains the weak demand for the printers seen in 3Q.
If the market reasons that HPQ has a superior product at a more reasonable price, 3D Systems and Stratasys face the risk of customer outflow and plunging sales. Prolonged sales decline would eventually undo the benefits of cost-cutting at the companies, thus leading to adverse impact on the bottom-line.
3Q earnings expectations
Wall Street is expecting 3D Systems to generate revenue of $160.2 million in 3Q, indicating a 5.6% growth YoY. Adjusted EPS is expected to be $0.09, rising from $0.01 in the corresponding quarter last year.
As for Stratasys, the consensus estimate calls for revenue of $174.5 million, suggesting a growth of 4% YoY. EPS is expected to be $0.05, up from $0.01 in the like quarter a year ago.