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DENTSPLY International Inc. (XRAY - Analyst Report) posted earnings per share of 57 cents in the third quarter of 2013 edging past the Zacks Consensus Estimate by a penny as well as the year-ago earnings of 51 cents by 11.8%. Net earnings rose nearly 11.0% to $82.2 million from $74.1 million in the third quarter of 2012.

Net revenues inched up 1.2% to $704.0 million but lagged the Zacks Consensus Estimate of $716 million. Excluding precious metals content, net revenues rose 3.4% to $669.4 million.

In constant currency, net sales grew 2.7%, excluding precious metals content, indicating internal growth in the U.S. and Rest of World geographic regions and continued modest internal growth in Europe.

Adjusted operating income escalated 7.2% to $119.7 million from $111.7 million in the year-ago quarter. Adjusted operating margin expanded 60 bps to 17.9% in the quarter from 17.3% a year ago.

DENTSPLY ended the third quarter with cash and cash equivalents of $50.7 million compared with $80.1 million at the end of 2012. Long-term debt decreased to $1,164.8 million as of Sep 30, 2013 from $1,222.0 million at the end of 2012.

Cash flow from operations rose 27.8% to $258.3 million in the first nine months of 2013, from $202.1 million in the year-ago period. Capital expenditure for the same period went up 13.3% to $73.5 million from $64.9 million a year ago.

DENTSPLY reiterated its 2013 adjusted-earnings per share expectation to the band of $2.33 to $2.38 as market conditions remained consistent with the expectations earlier this year.

Although the bottom line beat estimates, we remain unimpressed by DENTSPLY’s flat top line and revenue miss in the third quarter. This is mainly due to ongoing difficult dental market trends in Europe.  However, we note that the company performed well in the U.S. Moreover, improving margins represent a potential upside for XRAY.

Currently, DENTSPLY has a Zacks Rank #4 (Sell). Medical stocks that warrant a look are Align Technology (ALGN - Analyst Report), Cardinal Health, Inc. (CAH - Analyst Report) and Merit Medical Systems, Inc. (MMSI - Snapshot Report). All of them carry a Zacks Rank #1 (Strong Buy).

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