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Can Steady Overall Growth Drive Align's (ALGN) Q1 Earnings?

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Align Technology, Inc. (ALGN - Free Report) is set to report first-quarter 2018 earnings results on Apr 25, after market close.

Last quarter, the company posted a positive earnings surprise of 24%. Align Technology has outperformed the Zacks Consensus Estimate in all of the preceding four quarters, the average positive earnings surprise being 22.6%.

Let’s take a look at how things are shaping up prior to this announcement.

Invisalign System — A Major Growth Driver

Similar to prior quarters, Align Technology is expected to gain from continued adoption of Invisalign Technology in the first quarter of 2018 as well. Accordingly, the company projects Invisalign case shipments in the band of 264,000-269,000 in the to-be-reported quarter, up 26.9-29.3% from a year ago.

Notably, in November 2017, Align Technology announced the achievement of a milestone of five million patients undergoing treatment with its Invisalign system.

Interestingly, considering the fast-expanding market for clear aligner therapy, Align Technology has undertaken several strategies to drive the adoption of its core Invisalign product line. These include product/technology development, extending clinical effectiveness, promoting the Invisalign brand name and boosting international growth.

The company has also been focusing on increasing the Invisalign utilization by orthodontists. Particularly targeting the teenagers, Align Technology has adopted marketing strategies to accelerate consumer demand by allowing GP dentists to treat increased number of cases with the Invisalign system.

Align Technology, Inc. Price and EPS Surprise

 

Strength in Scanner and Service Business

Align Technology has also been witnessing strong revenue growth from the Scanner and Service business over the past few quarters. Moreover, the company has been witnessing increased adoption of iTero scanners for Invisalign case submissions instead of PVS impressions, especially in North America, thereby driving Invisalign utilization. Management expects this bullish trend to reflect in the company’s first-quarter results as well.

At the same time, Align Technology has been focusing on expanding workflow options of iTero scanners. In this context, last November the company signed an agreement with Glidewell Dental to distribute the iTero Element intraoral scanning system with the latest glidewell.io In-Office Solution in North America.

Align Technology had also signed a distribution agreement with Patterson Dental to make available its iTero Element intraoral scanning system as part of Patterson Dental’s CAD/CAM portfolio in the United States and Canada.

Solid Global Prospects

 Align Technology had introduced a clear Aligner solution for teen Class II correction — the Invisalign Technology Teen with mandibular advancement — in certain markets of Canada, EMEA and APAC in 2017. These are indicative of the growing popularity of its dental products in the international market.

Further, over the recent past, Align Technology reported strong international Invisalign Technology volumes on continued strong performance in both EMEA and APAC regions.

In the last reported quarter, EMEA, volumes were up on continued adoption of Invisalign Technology in core markets like the U.K., Spain and France, as well as rapid growth in smaller markets like Eastern Europe, Central Europe, Middle East and Africa. In the Asia-Pacific region, the company witnessed an impressive volume growth led by China, Japan and Australia. We expect to see a similar trend in the yet-to-be-reported quarter result as well.

Overall, Align Technology projects EPS of 94-98 cents on revenues of $400-$410 million in the first quarter of 2018. The Zacks Consensus Estimate for total revenues of $408 million in first-quarter 2018 indicates a rise of 37.4% from the year-ago quarter.

What Our Quantitative Model Suggests

Per the proven Zacks model, a company with a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP.

Align Technology has an Earnings ESP of +0.97% and a Zacks Rank #2, a combination that suggests the company to likely beat on earnings this quarter. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

The Zacks Consensus Estimate for earnings of 98 cents reflects a 46.3% rise on a year-over-year basis.

Other Stocks to Consider

Here are a few other medical stocks worth considering that have the right combination of elements to beat estimates this time around:

Laboratory Corporation Of America Holdings (LH - Free Report) has an Earnings ESP of +1.52% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Henry Schein, Inc. (HSIC - Free Report) has an Earnings ESP of +2.53% and a Zacks Rank #3.

Edwards Lifesciences Corporation (EW - Free Report) has a Zacks Rank #3 and an Earnings ESP of +0.99%.

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