Zacks_Analysts' Blog : Stratasys Delivers Decent 4Q - Analyst Blog

Stratasys Inc. (SSYS) reported fourth quarter 2010 earnings per share of 20 cents, 5 cents ahead of the Zacks Consensus Estimate. 

Revenue 

Stratasys reported fourth quarter 2010 revenue of $33.8 million, up 29.0% from $26.2 million reported in the year-ago quarter. Growth in revenue was attributable to an improvement in business conditions, which translated into substantial improvement in system shipments.

The company witnessed an improvement in revenue from consumable, which grew 29% year over year. The growth in consumables resulted from an improvement in market conditions and deeper market reach in the company’s rapidly growing areas. Management believes that growth should continue, as the market still remains to be explored.

Segment-wise, revenues from Products came in at $27.2 million, up 36.0% from $20.0 million reported in the year-ago quarter. Services revenue was $6.57 million, up 5.8% from $6.22 million reported in the year-ago quarter.

Operating Results 

Fourth quarter 2010 gross profit of $17.19 million (50.9% of total revenue) increased 26.4% from $13.36 million (50.9% of revenue) in the year-ago quarter. The gross margin improvement was fuelled by higher revenue from consumables, which is a high-margin product.

Reported operating income for the fourth quarter was $6.15 million, up a whopping 72.2% from $3.57 million reported in the fourth quarter of 2009. Operating expense was steeper by 12.8% from the year-ago quarter. The maximum impact came from the 12% increase in selling, general and administrative expenses.

The company reported net income (including stock-based compensation) of $4.3 million in the fourth quarter, or 20 cents per share, compared to net income of $2.4 million, or 12 cents per share in the comparable quarter last year.

Excluding stock-based compensation expense, non-GAAP net income was $4.5 million, or 21 cents per share in the fourth quarter, compared to $2.9 million or 14 cents per share reported in the comparable quarter prior year.

Balance Sheet 

The company exited the quarter with cash, cash equivalents and short-term investments of $36.35 million, down from $84.0 million reported in the previous quarter. The company does not have any long-term debt. 

 Guidance 

Stratasys did not provide any revenue or earnings guidance for the first quarter of 2011. The company witnessed an improvement in market conditions during the fourth quarter and remains optimistic about the upcoming quarters.

Conclusion

In addition to improving macroeconomic conditions, the company’s new collaboration with technology major Hewlett-Packard Company (HPQ) and slow revival in the U.S. economy spending would aid future growth. However, we are a bit apprehensive about the company’s high cost business model and stiff competition from big and small players.

The company has a Zacks #3 Rank (short-term Hold rating).