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Dentsply (XRAY) Up 3.5% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Dentsply International (XRAY - Free Report) . Shares have added about 3.5% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Dentsply due for a pullback? 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.

DENTSPLY SIRONA Q2 Earnings & Revenues Miss Estimates

DENTSPLY SIRONA Inc. reported second-quarter 2020 adjusted loss per share of 18 cents, wider than the Zacks Consensus Estimate for loss of 3 cents. Notably, the company had reported adjusted EPS of 66 cents in the prior-year quarter.

The company reported revenues of $490.6 million, which plunged 51.4% from the year-ago quarter due to the impact from the COVID-19 pandemic. Moreover, the top line missed the Zacks Consensus Estimate by 3.9%. Per management, internal sales declined 49.9%.

Business Details

Consumables

Consumable revenues were down 58.6% year over year and 57.7% on an internal basis in the first quarter to $186.7 million. Per management, decline in organic sales stemmed from lower demand across all three regions due to lower visits by dentists and customers and procedures on account of the COVID-19 pandemic. Lower sales of Endodontic, Restorative and Preventive products primarily led to the downside.

Technologies & Equipment

Technologies & Equipment revenues plunged 45.6% year over year to $303.9 million in the reported quarter. On an internal basis, sales declined 43.6%. Per management, decline in organic sales in in Equipment & Instruments, Digital Dentistry and Implants business was responsible for the downside.

Revenues by Geography

In the United States, revenues fell 60.3% to $130.9 million and 60% internally. Rest of World revenues declined 44% year over year to $144.4 million. Revenues in the geography decreased 41.9% on an internal sales growth basis. European revenues slumped 49% year on year to $215.3 million. On an internal sales growth basis, European revenues declined 46.9%.

Margin Analysis

Adjusted gross profit in the reported quarter amounted to $206.5 million, down 64.5% on a year-over-year basis. Adjusted gross margin was 42.1%, down 1560 basis points (bps).

Adjusted operating loss came in at $42.3 million, against the year-ago quarter’s adjusted operating income of $201.8 million.

Financial Condition

DENTSPLY SIRONA exited the second quarter with cash and cash equivalents of $1.11 billion, up from $235.9 million on a sequential basis.
Cumulative net cash provided by operating activities was $164.4 million, down 5.7% from the prior-year period. 

2020 Guidance

Due to the continued uncertainty regarding the duration and impact of the COVID-19 pandemic on the company’s business, the company has not issued 2020 guidance.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -22.61% due to these changes.

VGM Scores

Currently, Dentsply has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

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

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Dentsply has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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