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Why Is Dentsply (XRAY) Down 8.5% Since Last Earnings Report?

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A month has gone by since the last earnings report for Dentsply International (XRAY - Free Report) . Shares have lost about 8.5% in that time frame, underperforming the S&P 500.

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

DENTSPLY SIRONA Q4 Earnings & Revenues Miss Estimates

DENTSPLY SIRONA Inc. reported fourth-quarter 2021 adjusted earnings per share of 76 cents, missing the Zacks Consensus Estimate of 79 cents by 3.8%. The bottom line declined 12.6% on a year-over-year basis.

GAAP earnings per share in the quarter was 47 cents, up 4.4% from the year-ago quarter.

For the full-year 2021, the company reported an adjusted earnings per share of $2.87, up 60.3% from the previous year. The figure lagged the consensus mark by 0.7%.

Revenues

Revenues in the quarter under review amounted to $1.09 billion, missing the Zacks Consensus Estimate by 3.6%. The top line increased 0.6% year over year. Sales grew 1.8% on an organic basis.

In 2021, the company reported $4.23 billion, up 27.2% from the previous year. On an organic basis, sales grew 24.6%. The figure, however, missed the consensus mark by 1.4%.

Business Details

Consumables

Consumable revenues fell 8.3% year over year and 4.6% on an organic basis in the fourth quarter to $412 million. Per management, the downside was due to a tough comparison in the prior-year quarter on account of the COVID-19 rebound and the timing of purchases ahead of the annual price increase. However, increased pricing partially negated the downside.

Technologies & Equipment

Technologies & Equipment revenues were up 6.8% year over year to $676 million in the reported quarter. On an organic basis, net sales rose 6.5%. Strength in CAD/CAM (computer-aided-design and computer-aided-manufacturing), Implants and Orthodontics contributed to the improvement. However, supply chain constraints partially offset the upside.

Revenues by Geography

In the United States, revenues increased 7.2% to $385 million. Rest of World revenues fell 3.4% year over year to $266 million. European revenues declined 2.4% year over year to $437 million.

Margin Analysis

Gross profit in the reported quarter amounted to $593 million, up 3.9% on a year-over-year basis. Gross margin was 54.5%, expanding 170 basis points (bps).

Selling, general and administrative expenses were $374 million, down 0.8% from the year-ago quarter. Research and development expenses amounted to $59 million, up 34.1% from the prior-year quarter.

Operating profit was $154 million, up 14.1% from the year-ago quarter. Operating margin was 14.2%, expanding 170 bps on a year-over-year basis.

Financial Condition

DENTSPLY SIRONA exited the fourth quarter of 2021 with cash and cash equivalents of $339 million, up from $281 million in the third quarter of 2021.

Cumulative net cash provided by operating activities at the end of the fourth quarter was $657 million compared with $635 million in the year-ago period.

Share Repurchase and Dividend Update

During the quarter, DENTSPLY SIRONA repurchased shares worth $110 million, while it repurchased shares worth $200 million in 2021. The company had $890 million of authorization remaining under the $1 billion share repurchase program at the end of Dec 31, 2021.

With respect to the dividend, DENTSPLY SIRONA’s board of directors approved a double-digit increase in the company’s quarterly dividend rate, from the prior rate of 11 cents per share to 12.5 cents per share.

2022 Guidance

The company projects 2022 revenues within $4.3-$4.4 billion. The Zacks Consensus Estimate for the same is pegged at $4.47 billion. The outlook includes organic sales growth of 4-5%.

The company expects an adjusted earnings per share of $3.05-$3.25, up 6-13% on a year-over-year basis. The Zacks Consensus Estimate for the same stands at $3.18.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

The consensus estimate has shifted -8.27% due to these changes.

VGM Scores

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

Overall, the stock has an aggregate VGM Score of B. 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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