3D printing is probably still foreign to a lot of of people, at least relative to paper printing, despite a shout-out from the President during his latest State of the Union address. 3D printers create objects by “printing” successive layers of resin or thermoplastic material onto a base, according to design files that are input to an attached computer system. While the primary users of the machines have been manufacturing enterprises looking to lower design and tooling costs, industry pioneer Stratasys, Ltd. (NASDAQ:SSYS) is looking to change that with a deal to install its machines in United Parcel Service, Inc. (NYSE:UPS) stores around the country. So, should investors finally dive into the sector?
Stratasys has enjoyed a strong five-year run for its share price, as it has grown revenues and investors have afforded it a higher P/E ratio. To facilitate growth, the company has expanded its reach beyond the manufacturing environment, finding opportunities in places like the medical and education sectors. Of course, the Holy Grail is the large consumer market, where the company hopes to gain market share against rival 3D Systems Corporation (NYSE:DDD) with its entry level uPrint and Mojo product lines.
In its latest fiscal year, Stratasys, Ltd. (NASDAQ:SSYS) enjoyed solid financial results, with increases in revenues and adjusted operating income of 38.0% and 56.2%, respectively, versus the prior year. The company’s sales growth benefited from strong gains in unit volumes, up 41% for the period, due to a broadening product line that was enhanced by its December 2012 merger with Israel-based competitor Objet. In addition, Stratasys, Ltd. (NASDAQ:SSYS)’s operating margin increased as it generated a greater percentage of sales from its higher-priced Fortus product line, which allows manufacturers to directly produce end products from the printers.
For its part, United Parcel Service, Inc. (NYSE:UPS) is looking to expand the productive use of its retail store network, which sells a variety of packaging supplies and printing services, as well as being a conduit for its global delivery network. With global economic growth weak, the company has had trouble finding additional revenue opportunities to offset rising compensation costs. Its bid to further expand its delivery network in Europe ran into a wall when the European Commission blocked its acquisition of competitor TNT Express in January 2013.
In the first six months of FY2013, United Parcel Service, Inc. (NYSE:UPS) has reported mixed financial results, with a 1.7% increase in revenues and a 1.1% decrease in operating income. Despite a low single-digit increase in its average daily package volume compared to the prior year, the company’s results were hurt by lower average prices, as its customers opted for cheaper ground services versus its express and air offerings. In addition, the company experienced declining profits in its supply chain segment, due to its decision to back away from matching low price competitors in the freight forwarding area.