Proto Labs, Inc. PRLB is scheduled to report first-quarter 2018 results on Apr 26, before the market opens.

In the past four quarters, the company delivered better-than-expected results, with an average positive earnings surprise of 6.67%. In the last reported quarter, its earnings of 58 cents per share exceeded the Zacks Consensus Estimate by 3.57%.

In the last six months, the company’s shares have yielded 49% return, outperforming the gain of 39.4% recorded by the industry it belongs to.

Factors to Influence Q1 Results

Proto Labs — a specialist in custom prototyping and on-demand custom manufacturing — is constantly working toward improving its capabilities and services. In this regard, the buyout of Rapid Manufacturing Group (in December last year) is worth mentioning. This asset has enhanced the company’s service offerings, the latest one being steel metal fabrication service and has also fortified its capabilities in CNC machining. The company expects the Rapid Manufacturing buyout and acquisition of a small software company (acquired in the same month last year) to be beneficial in expanding its offerings.

Notably, in March 2018, the company added a new 152,000 square feet manufacturing facility to its portfolio. The new facility, to be used for CNC machining, will be further expanded by 50,000 sq. ft. and will start commercial production by 2018-end.

Also, Proto Labs believes that increasing competition among its customers is a positive as it raises the need for lowering the duration of product development cycles and low-volume production. Moreover, increasing usage of Internet-of-Things devices has been raising demand for the company’s services. Expansion of the 3D printing services with the addition of Multi Jet Fusion technology and on-demand manufacturing service for molded production parts in 2017 are anticipated to be beneficial in the quarters ahead.

For the first quarter, Proto Labs anticipates revenues to be within $101-$106 million, reflecting year-over-year growth of 26-32%. This projection includes positive impacts from favorable foreign currency translation and contribution from the Rapid Manufacturing buyout. Non-GAAP earnings per share are predicted to be within 64-70 cents.

Notwithstanding all the positive aspects, we believe that rising competitiveness among the prototype manufacturers is a cause of concern for Proto Labs. Also, any failure in the research and development of new products and inability to meet the specific requirements of customers remain concerns. Furthermore, economic turbulence, if any, will impact demand for products offered by its customers and hence impact demand for its own services.

Earnings Whispers

Our proven model provides some idea on the stocks that are about to release their earnings results. Per the model, a stock needs to have a combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy) or 2 (Buy) or 3 (Hold) for a likely earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

That is not the case for Proto Labs as you will see below.

Zacks ESP: Earnings ESP of Proto Labs is currently 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 69 cents.

Proto Labs, Inc. Price and EPS Surprise
 

Proto Labs, Inc. Price and EPS Surprise | Proto Labs, Inc. Quote

Zacks Rank: Proto Labs’ Zacks Rank #3 when combined with 0.00% ESP makes surprise prediction difficult.

Note that we caution against stocks with Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies in the Zacks Industrial Products sector that you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:

HD Supply Holdings, Inc. HDS, with an Earnings ESP of +1.23% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Kennametal Inc. KMT, with an Earnings ESP of +1.73% and a Zacks Rank #2.

Lincoln Electric Holdings, Inc. LECO, with an Earnings ESP of +2.17% and a Zacks Rank #3.

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