Back to top

Image: Bigstock

Align Technology (ALGN) Beats on Q4 Earnings, Margins Up

Read MoreHide Full Article

Align Technology, Inc.’s (ALGN - Free Report) fourth-quarter 2020 earnings per share (“EPS”) was $2.61, up from the year-ago EPS of $1.76, reflecting an improvement of 48.3%. The quarter’s EPS surpassed the Zacks Consensus Estimate by 21.9%. Significantly better-than-expected revenues of Invisalign Clear Aligners and iTero scanners during the fourth quarter despite the COVID-19 pandemic resulted in the bottom-line beat.

GAAP EPS for the quarter was $2.00, up from the year-ago EPS of $1.53, reflecting an uptick of 30.7%.

Full-year adjusted EPS was $5.25, reflecting a 12.1% decrease from the year-ago period. However, the metric surpassed the Zacks Consensus Estimate by 12.2%.

Full-year GAAP EPS was $22.41, reflecting a stupendous surge of 305.2% from the year-ago period.

Revenues

Revenues surged 28.4% year over year to $834.5 million in the quarter, beating the Zacks Consensus Estimate by 6.1%.

Full-year revenues were $2.47 billion, reflecting a 2.7% increase from the year-ago period. Again, the metric surpassed the Zacks Consensus Estimate by 2.1%.

Align Technology, Inc. Price, Consensus and EPS Surprise

 

Align Technology, Inc. Price, Consensus and EPS Surprise

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

Segments in Detail

In the fourth quarter, revenues at the Clear Aligner segment rose 28.9% year over year to $700.7 million due to volume increase across geographies. Within the segment, Invisalign case shipments amounted to 567.9 thousand, up 37.3% year over year.

During the quarter, Clear Aligner volumes were up 34.1% and 41.1% year over year in the Americas and International regions, respectively. In Latin America, the growth was led by Mexico and Brazil, whereas the international business was driven by EMEA and APAC.

Clear Aligner volume for teenage patients was 160.9 thousand cases, up 38.7% year over year. In terms of products performance, the company recorded strong growth across the Invisalign portfolio, especially for non-comprehensive cases including Invisalign Go and Invisalign Moderate. Also, growth was registered with Invisalign First for treatment of younger kids, which drove increased comprehensive treatments within the North American orthodontic channel. Increased utilization in the general practitioner dentist channel was witnessed with Invisalign Go and the continued adoption of Moderate.

Revenues from Imaging Systems & CAD/CAM Services surged 26% to $133.8 million in the quarter due to strong growth in EMEA and APAC. Sequentially, the company’s revenues recorded an uptick of 18%, driven by momentum in the Americas and EMEA. The company also recorded continued momentum with the iTero Element 5D Imaging System, with strength in all regions with significant Element Flex sales in EMEA.

Margins

Gross profit in the fourth quarter was $610.5 million, reflecting an improvement of 29.3% year over year. Gross margin in the quarter under review expanded 52 basis points (bps) year over year to 73.2% despite a 25.9% uptick in cost of net revenues.

During the quarter, Align Technology witnessed a 24.7% year-over-year increase in selling, general and administrative expenses to $348.4 million and a 18.3% rise in research and development expenses to $48.9 million.

Operating income in the quarter under review was $213.2 million compared with operating profit of $151.2 million year over year, indicating an uptick of 41%. The operating margin expanded 228 bps to 25.5%.

Financial Details

Align Technology exited 2020 with cash, cash equivalents and short-term marketable securities of $960.8 million compared with $868.6 million recorded at the end of 2019.

Cumulative net cash provided by operating activities at the end of the year was $662.2 million compared with $747.3 million a year ago.

The company currently has approximately $100 million left under its May 2018 repurchase program.

Guidance

The uncertainties regarding the duration and impact of the coronavirus pandemic on the company’s overall business have compelled Align Technologies to refrain from providing any guidance for 2021. However, the company is optimistic about maintaining its strong momentum in business in the coming months.

Our Take

Align Technologies exited the fourth quarter of 2020 with better-than-expected results despite the challenging business environment. The company saw significantly higher sales of Invisalign clear aligners and iTero scanners amid the pandemic. Impressive international performance across geographies and increased shipment volumes buoy optimism on the stock. Robust segmental performances and margin expansions look encouraging. Continued adoption of the company’s digital platform has also been looking impressive. The company’s Consumer and Patient app was rolled out to more than 50 markets, thus instilling confidence on the stock.

However, the company not providing any guidance due to the unrelenting spread of the pandemic is worrying.

Zacks Rank and Other Key Picks

Align Technology currently has a Zacks Rank #2 (Buy).

A few other top-ranked stocks in the broader medical space are Abbott Laboratories (ABT - Free Report) , Hologic, Inc. (HOLX - Free Report) and IDEXX Laboratories, Inc. (IDXX - Free Report) .

Abbott reported fourth-quarter 2020 adjusted EPS of $1.45, which surpassed the Zacks Consensus Estimate by 6.6%. Fourth-quarter worldwide sales of $10.7 billion outpaced the consensus mark by 7.9%. The company currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Hologic reported first-quarter fiscal 2021 adjusted EPS of $2.86, beating the Zacks Consensus Estimate by 33.6%. The company currently flaunts a Zacks Rank #1.

IDEXX reported fourth-quarter 2020 adjusted EPS of $2.01 which surpassed the Zacks Consensus Estimate by 40.6%. Revenues of $720.9 million beat the consensus mark by 5.8%. The company currently carries a Zacks Rank #2.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

Today, See These 5 Potential Home Runs >>