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Here's Why You Should Sell DENTSPLY SIRONA (XRAY) Stock Now

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DENTSPLY SIRONA (XRAY - Free Report) has underperformed the industryin the last six months. The company’s shares have lost 27.9% comparing unfavorably with the industry’s gain of 5.1%. The current level is also significantly lower than the S&P 500 index’s return of 5.3%.

A rapidly changing healthcare environment in the United States, a sluggish first quarter, declining margins and foreign exchange headwinds are significant obstacles for the company.

Battered by the above challenges, the Zacks Consensus Estimate for second-quarter adjusted earnings is currently pegged at 60 cents, down 20% in the last two months. This also marks a 7.7% fall year over year. The stock has a Zacks Rank #5 (Strong Sell).

 

 

Below we take a sneak peek at the major issues plaguing DENTSPLY SIRONA.

The company expects gross margins and operating margins to remain flat or slightly down on a year-over-year basis in the coming quarters. This is because underlying margin rate improvement is expected to be offset by foreign exchange effects and headwind from the target inventory equipment reductions.

Further, as the company is committed to delivering $100 million in operating cost savings by fiscal 2019, it expects more than half of the amount in 2018. Although the savings should result in increased margin over time, the same in2018 are likely to be affected.

By the end of the first quarter of 2018, DENTSPLY SIRONA confirmed that it expects 2018 full-year operating margins to be down between 100 basis points (bps) and 150 bps on a year-over-year basis.

In this regard, DENTSPLY SIRONA reported adjusted earnings per share (EPS) of 45 cents in the first quarter of 2018, down 8.2% year over year. The metric beat the Zacks Consensus Estimate by 7.1%.  Net sales fell 1.1% year over year to $956.1 million on a constant-currency (cc) basis. However, the figure surpassed the Zacks Consensus Estimate of $944.7 million. Management expects adjusted earnings per share for 2018 in the range of $2.55-$2.65, down from the previous range of $2.70-$2.80. Revenues are projected to rise 2% at cc.

DENTSPLY SIRONA has solid international presence. Therefore, a strong U.S. dollar, especially against the euro as well as emerging market currencies had a negative impact on results. We believe that currency volatility will remain a headwind for 2018.

The company faces significant pricing pressure due to intense competition. DENTSPLY SIRONA conducts its operations, domestic and foreign, under highly-competitive market conditions. The size and number of the company’s competitors vary by product line and regionally.

Key Picks

A few better-ranked stocks in the broader medical space are ABIOMED, Inc. (ABMD - Free Report) , Genomic Health, Inc. (GHDX - Free Report) and Intuitive Surgical (ISRG - Free Report) .

Abiomed has an estimated long-term growth rate of 27%. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Genomic Health has an expected growth rate of 187.5%. The stock flaunts a Zacks Rank #1.

Intuitive Surgical has an expected long-term growth rate of 12.1% and sports a Zacks Rank #1.

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