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Align Technology (ALGN) to Post Q4 Earnings: What's in Store?

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Align Technology, Inc. (ALGN - Free Report) is set to report fourth-quarter and full-year 2020 results on Feb 3, after the closing bell.

In the last-reported quarter, the company reported an adjusted earnings per share of $2.25, which surpassed the Zacks Consensus Estimate by a stupendous 281.4%. Over the trailing four quarters, its earnings outperformed the Zacks Consensus Estimate on two occasions and missed the same in the other two, the four-quarter average beat being -785.09%.

Let’s take a look at how things have shaped up prior to this announcement.

Factors at Play

Invisalign System

Per the company’s October update, Align Technology has been recording a sharp month-wise rebound in sales for both Invisalign clear aligners and iTero imaging systems. This momentum is likely to have continued during the rest of the fourth quarter on the back of gradual reopening of practices worldwide. Further, the uptick in Invisalign shipments, observed over the past few months, is likely to have continued during the to-be-reported quarter due to gradual recovery in businesses across all regions. With the ongoing easing of restrictions and doctors ramping up their practices, fourth-quarter revenues are likely to reflect a significant uptick.

Over the past few months, there has been an increasing adoption of virtual tools by providers of the Invisalign system. The company also confirmed recording increased use of iTero scanners, its Virtual Care and bracket buyback switch during its last update. The robust ongoing adoption of sustainable digital care with Invisalign is likely to have continued during the fourth quarter as well, thus driving up revenues. Notably, Align Technology confirmed rolling out My Invisalign app and Virtual Care during the third-quarter earnings call to support digital care.

Clear Aligner shipments were robust during the last-reported quarter due to increasing customer adoption. This is likely to have continued its momentum during the fourth quarter as well on the back of positive feedback from Invisalign practices regarding the benefits of digital orthodontics. Growth in shipment volumes is expected on strong adoption of non-comprehensive products, thanks to Invisalign Go systems and Invisalign Moderate.

Align Technology’s expansion of its digital platform with cloud-based ClinCheck Pro 6.0 and ClinCheck In-Face Visualization tool for Invisalign treatment looks promising and is expected to have boosted the top line. The company introduced Invisalign G8 with SmartForce Aligner Activation in October 2020 to improve treatment predictability for frequently treated case types. Other notable offerings include Invisalign Virtual Appointment and Invisalign Virtual Care, contributing to the company’s virtual solutions, and thus driving up the company’s revenues.

The availability of Steraligner aligner cleaning system on the Invisalign Doctor Site web store and InvisalignAccessories.com, and Invisalign Stickables (innovative sticker accessories designed exclusively for use with the SmartTrack material in Invisalign clear aligners), are expected to have continued to boost the company’s sales during the fourth quarter.

Additionally, the multi-year partnership with the New Orleans Saints and an agreement with the National Football League (“NFL”) to make the Invisalign brand the Official Clear Aligner Sponsor of the NFL, buoy optimism.

Internationally, in the APAC region, the company registered uptick in teen shipments due to gradual reopening of practices, mainly in Japan and ANZ. Despite our expectations of the continuation of this trend during the to-be-reported quarter, the impact of the fresh wave of coronavirus infection looms large on the company’s top line.

The Zacks Consensus Estimate for Invisalign System’s revenues is pegged at $645 million, suggesting an upsurge of 18.6% from the year-ago quarter’s reported figure.

Imaging Systems & CAD/CAM Services Business

The inclusion of exocad CAD/CAM (computer-aided design/computer-aided manufacturing) products and services post its April 2020 buyout are also likely to have continued to boost Align Technology’s top line during the fourth quarter. Notably, the company renamed its Scanner and Service business as the Imaging Systems & CAD/CAM Services business post the exocad buyout.

The continued momentum of Element 5D Imaging Systems in North America and APAC, which was observed during the third quarter, are likely to have continued in the fourth quarter.

The Zacks Consensus Estimate for this segment’s revenues is pegged at $124 million, suggesting an uptick of 16.9% from the year-ago quarter’s reported figure.

Align Technology, Inc. Price and EPS Surprise

Align Technology, Inc. Price and EPS Surprise

Align Technology, Inc. price-eps-surprise | Align Technology, Inc. Quote

The Estimate Picture

The Zacks Consensus Estimate for fourth-quarter 2020 revenues is pegged at $781.9 million, indicating an improvement of 20.3% from the year-ago figure.

The same for the bottom line is pinned at earnings of $2.13 per share, suggesting an uptick of 39.2%.

What Our Model Suggests

Per our proven model, a stock with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) along with a positive Earnings ESP has higher chances of beating estimates. However, this is not the case here as you can see:

Earnings ESP: Align Technology has an Earnings ESP of -7.28%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company currently carries a Zacks Rank #2.

Stocks Worth a Look

Here are a few medical stocks worth considering, as these have the right combination of elements to beat on earnings this reporting cycle.

DENTSPLY SIRONA Inc. (XRAY - Free Report) has an Earnings ESP of +4.45% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Patterson Companies, Inc. (PDCO - Free Report) has an Earnings ESP of +1.96% and a Zacks Rank of 2, at present.

Omnicell, Inc. (OMCL - Free Report) has an Earnings ESP of +8.86% and is a Zacks #1 Ranked stock.

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