3D Systems (NYSE:DDD) shares regained some momentum since the start of this month after the company surprised investors with its strong fourth quarter performance. The stock price recovered slightly from its earlier trading range of $8 a share. 3D shares are currently trading around $12, significantly higher from the 52-week low of $7 a share.
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Its revenue and earnings exceeded analysts’ consensus estimates by $13 million and $0.05 per share, respectively. Its revenue increased 7% year over year to $177 million, driven by strong demand from healthcare, manufacturing, software and materials industry.
On the negative side, the company needs to do more work on its gross margin and cost structure to improve the earnings potential. It posted negative earnings of $0.08 per share in the fourth quarter, compared to earnings of $0.05 per share in the previous year quarter. Its gross margin dipped to 48% in fourth quarter from 50% in the past year period.
Its SG&A expenses jumped 18%, and R&D expenses rose 9% in Q4 over the past year quarter. The company says the continued investments in operational improvements that are critical for long-term success are raising its expenses from the prior year periods.
“We made progress in many areas this year, from better analytics, processes and operational cadence to IT infrastructure and supply chain optimization. We continue to be focused on the decisions and actions needed to drive appropriate cost structure, while at the same time, positioning the company for long-term growth,” said Vyomesh Joshi (VJ), chief executive officer, 3D Systems.
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Its cash generation potential decreased in fiscal 2017 due to lower earnings, while cash and cash equivalents at the end of the period also declined to $136 million from $184 million in fiscal 2016. Market pundits expect the company’s share price to remain under pressure over the next few months before bouncing back.
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