Stratasys ( Nasdaq - SSYS ) -- Excellent Q4 Results

Stratasys (SSYS $37.00) reported excellent on target Q4 results.  Sales met our estimate, finishing up 28% at $43.6 million.  Earnings exceeded our forecast due to a lower tax rate, fewer than expected shares outstanding, and higher than predicted margins.  The ongoing shift to production systems from R&D units contributed to the higher profit margin.  Those systems also consume more raw materials.  Stratasys sells those plastics itself, which is highly profitable due to a lack of direct competition.  Income climbed 48% to $.31 a share.  For the entire year sales advanced 27% to $155.9 million.  Earnings (excluding stock option expense and amortization of acquired intangibles) improved 65% to $1.04 a share.

We have raised our 2012 earnings estimate a dime to $1.25 a share.  Our sales estimate is unchanged at $185 million.  The same mix of factors that helped Q4 are likely to boost income in the upcoming year.  The intermediate outlook continues to look positive.  Stratasys is the leading provider of 3D printing machines.  The industry is expanding at a 20%-30% rate.  Profitability is high.  And new products are in the pipeline.  The main risk facing Stratasys is that the company is moving too slowly to capture the immense opportunity 3D printing may hold.  By going it alone the company may be exposed if larger players enter the industry.  Establishing partnerships now could ensconce Stratasys as the center of the industry over the long haul.  The key is likely to be input materials.  If the company can join forces with gigantic metal and plastic producers to expand the number of products its systems can produce, who knows, this could be the next Microsoft. 

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