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Align Technology (ALGN) Down 9% Since Last Earnings Report: Can It Rebound?
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It has been about a month since the last earnings report for Align Technology (ALGN - Free Report) . Shares have lost about 9% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Align Technology 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 drivers.
Align Technology Tops Q2 Earnings, Gross Margin Up
Align Technology delivered second-quarter 2023 adjusted earnings per share of $2.22, up 3.3% from the year-ago earnings. The EPS exceeded the Zacks Consensus Estimate by 9.9% in the second quarter.
GAAP earnings per share for the quarter was $1.46, reflecting a 1.4% increase year over year.
Revenues
Revenues increased 3.4% year over year to $1002.2 million in the quarter and also beat the Zacks Consensus Estimate by 1.7%. Revenues were impacted by the unfavorable foreign exchange of approximately $19.4 million year over year.
At the constant exchange rate or CER, total revenues in the second quarter were up 1.9% year over year.
Segments in Detail
The company has two reportable segments —Clear Aligner and Imaging Systems and CAD/CAM Services (Systems and Services)
Revenues in the Clear Aligner segment were up 4.3% year over year to $832.7 million.
The growth was driven by higher volumes, increased Average Selling Prices (ASP) as well as higher non-case revenues. However, revenues were unfavorably impacted by a foreign exchange headwind of approximately $16.3 million (or 1.9%) year over year. Total Clear Aligner shipments during the quarter amounted to 604,445, up 0.9% year over year.
Revenues from Imaging Systems & CAD/CAM Services were down 1.0% to $169.5 million in the quarter.
Revenues witnessed an unfavorable currency impact of 1.8% year over year.
Margins
The gross profit in the second quarter was $713.6 million, reflecting an increase of 3.8% year over year. The gross margin in the quarter under review expanded 29 basis points (bps) year over year to 71.2% despite a 2.3% increase in the cost of net revenues.
During the quarter, Align Technology witnessed a 6.3% increase in SG&A expenses to $453.2 million and a 21.3% rise in R&D expenses to $88.5 million.
The operating income in the quarter under review was $171.9 million, highlighting a decline of 8.6%. The operating margin contracted 225 bps to 17.2%.
Financial Details
Align Technology exited the second quarter of 2023 with cash and cash equivalents of $952 million compared with the $942.1 million recorded at the end of 2022.
The cumulative net cash provided by operating activities at the end of the second quarter was $451.7 million compared with $157.5 million at the end of Jun 30, 2022.
Currently, $1 billion is available for repurchases under ALGN’s $1 billion Stock Repurchase Program, which was authorized in the first quarter of 2023 to succeed the 2021 $1 billion program. Further, the company’s management noted the completion of the $75 million equity investment in Heartland Dental, a multidisciplinary Dental Service Organization with GDP and ortho practices across the United States.
Full-Year Guidance
Align Technology provided an updated outlook for 2023.
For the full year, ALGN anticipates revenues in the range of $3.97 billion-$3.99 billion, implying a 12% improvement from 2022 at the midpoint. The Zacks Consensus Estimate for Align Technology’s 2023 revenues is pegged at $3.89 billion.
The company expects to report a 2023 GAAP operating margin of slightly more than 17% (previously 16%) and an adjusted operating margin of slightly higher than 21% (earlier 20%).
For 2023, Align Technology expects investments in capital expenditures to be approximately $200 million (earlier projected to exceed the same). Capital expenditures are primarily related to building construction and improvements and additional manufacturing capacity to support Align Technology’s international expansion.
For the third quarter of 2023, ALGN anticipates revenues in the range of $990 million-$1,010 million. The Zacks Consensus Estimate for the same is pegged at $978.1 million.
The company anticipates its adjusted operating margin to be slightly up on a sequential basis as it continues to prioritize investments in R&D and go-to-market activities to drive growth.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month.
The consensus estimate has shifted 6.06% due to these changes.
VGM Scores
Currently, Align Technology has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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 trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Align Technology has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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Align Technology (ALGN) Down 9% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for Align Technology (ALGN - Free Report) . Shares have lost about 9% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Align Technology 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 drivers.
Align Technology Tops Q2 Earnings, Gross Margin Up
Align Technology delivered second-quarter 2023 adjusted earnings per share of $2.22, up 3.3% from the year-ago earnings. The EPS exceeded the Zacks Consensus Estimate by 9.9% in the second quarter.
GAAP earnings per share for the quarter was $1.46, reflecting a 1.4% increase year over year.
Revenues
Revenues increased 3.4% year over year to $1002.2 million in the quarter and also beat the Zacks Consensus Estimate by 1.7%. Revenues were impacted by the unfavorable foreign exchange of approximately $19.4 million year over year.
At the constant exchange rate or CER, total revenues in the second quarter were up 1.9% year over year.
Segments in Detail
The company has two reportable segments —Clear Aligner and Imaging Systems and CAD/CAM Services (Systems and Services)
Revenues in the Clear Aligner segment were up 4.3% year over year to $832.7 million.
The growth was driven by higher volumes, increased Average Selling Prices (ASP) as well as higher non-case revenues. However, revenues were unfavorably impacted by a foreign exchange headwind of approximately $16.3 million (or 1.9%) year over year. Total Clear Aligner shipments during the quarter amounted to 604,445, up 0.9% year over year.
Revenues from Imaging Systems & CAD/CAM Services were down 1.0% to $169.5 million in the quarter.
Revenues witnessed an unfavorable currency impact of 1.8% year over year.
Margins
The gross profit in the second quarter was $713.6 million, reflecting an increase of 3.8% year over year. The gross margin in the quarter under review expanded 29 basis points (bps) year over year to 71.2% despite a 2.3% increase in the cost of net revenues.
During the quarter, Align Technology witnessed a 6.3% increase in SG&A expenses to $453.2 million and a 21.3% rise in R&D expenses to $88.5 million.
The operating income in the quarter under review was $171.9 million, highlighting a decline of 8.6%. The operating margin contracted 225 bps to 17.2%.
Financial Details
Align Technology exited the second quarter of 2023 with cash and cash equivalents of $952 million compared with the $942.1 million recorded at the end of 2022.
The cumulative net cash provided by operating activities at the end of the second quarter was $451.7 million compared with $157.5 million at the end of Jun 30, 2022.
Currently, $1 billion is available for repurchases under ALGN’s $1 billion Stock Repurchase Program, which was authorized in the first quarter of 2023 to succeed the 2021 $1 billion program. Further, the company’s management noted the completion of the $75 million equity investment in Heartland Dental, a multidisciplinary Dental Service Organization with GDP and ortho practices across the United States.
Full-Year Guidance
Align Technology provided an updated outlook for 2023.
For the full year, ALGN anticipates revenues in the range of $3.97 billion-$3.99 billion, implying a 12% improvement from 2022 at the midpoint. The Zacks Consensus Estimate for Align Technology’s 2023 revenues is pegged at $3.89 billion.
The company expects to report a 2023 GAAP operating margin of slightly more than 17% (previously 16%) and an adjusted operating margin of slightly higher than 21% (earlier 20%).
For 2023, Align Technology expects investments in capital expenditures to be approximately $200 million (earlier projected to exceed the same). Capital expenditures are primarily related to building construction and improvements and additional manufacturing capacity to support Align Technology’s international expansion.
For the third quarter of 2023, ALGN anticipates revenues in the range of $990 million-$1,010 million. The Zacks Consensus Estimate for the same is pegged at $978.1 million.
The company anticipates its adjusted operating margin to be slightly up on a sequential basis as it continues to prioritize investments in R&D and go-to-market activities to drive growth.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month.
The consensus estimate has shifted 6.06% due to these changes.
VGM Scores
Currently, Align Technology has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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 trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Align Technology has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.