DENTSPLY (XRAY) Down 11.8% Since Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for DENTSPLY SIRONA Inc. XRAY. Shares have lost about 11.8% in that time frame.

Will the recent negative trend continue leading up to its next earnings release, or is XRAY due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Recent Earnings

DENTSPLY reported adjusted earnings per share (EPS) of 45 cents in the first quarter of 2018, beating the Zacks Consensus Estimate by 7.1%. However, the metric fell 8.2% year over year.

Net sales increased 6.2% year over year to $ 956.1 million. Also, the figure surpassed the Zacks Consensus Estimate of $ 944.7 million. However, the metric declined 1.1% at constant currency (cc) exchange rate.

Net sales (Excluding Precious-Metal Impact)

Net sales of the company’s precious-metal dental alloy products, which are used by third parties to construct crown and bridge materials, are subject to risks from fluctuations of precious metal prices.

To avoid the impact of fluctuating prices, DENTSPLY reports net sales with and without precious metal content to show actual performance, independent of precious metal price volatility.

Net sales in the segment were $ 945.8 million, up 6.3% year over year.

The business is organized into two reporting segments — Dental & Healthcare Consumables and Technologies.

Dental & Healthcare Consumables

The segment comprises preventive, restorative, instruments, endodontic and laboratory dental products as well as consumable medical device products.

Net sales improved 6.2% to $ 447.8 million in the segment, while it declined 0.4% at cc.

Technologies & Equipment segment

Technologies consist of dental implants, CAD/CAM systems, imaging systems, treatment centers and orthodontic products.

The metric increased 6.1% to $ 508.3 million in the segment on a year-over-year basis. However, revenues were down 5.8% at cc.

Geographic Details

In the quarter, sales in the United States fell 6.9% to $ 291.8 million year over year. Revenues in the area fell 7.4% at cc.

Net sales in Europe increased 14.2% to $ 425.5 million and 0.6% at cc.

Net sales in Rest of World climbed 11.4% to $ 238.8 million and 5.3% at cc.

Margin Analysis

Gross profit in the reported quarter was $ 514.1 million, up 4.5% year over year. However, as a percentage of revenues, gross margin contracted 80 basis points (bps) to 53.8%.

Operating income fell 18.4% to $ 68.7 million in the quarter. Operating margin in the quarter contracted 220 bps to 7.2% of net revenues.

Guidance

Management expects adjusted earnings per share for 2018 in the range of $ 2.55-$ 2.65, down from the previous range of $ 2.70-$ 2.80.

Revenues are projected to rise 2% at cc.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. There have been nine revisions lower for the current quarter.

DENTSPLY SIRONA Inc. Price and Consensus

 

DENTSPLY SIRONA Inc. Price and Consensus | DENTSPLY SIRONA Inc. Quote

VGM Scores

At this time, XRAY has a nice Growth Score of B, however its Momentum is doing a bit better with an A. The stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Based on our scores, the stock is primarily suitable for momentum investors while also being suitable for those looking for growth and to a lesser degree value.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. It's no surprise XRAY has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.

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