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Can R&D Focus Drive DENTSPLY SIRONA's (XRAY) Q3 Earnings?

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DENTSPLY SIRONA’s (XRAY - Free Report) third-quarter 2018 results are scheduled to release on Nov 8. The company’s focus on Research and Development (R&D) is expected to boost quarterly results.

Let’s take a look at other major factors that will influence DENTSPLY SIRONAS’ performance in the quarter to be reported.

Q2 Results at a Glance

In the last reported quarter, the company reported adjusted earnings per share (EPS) of 60 cents, which beat the Zacks Consensus Estimate by a penny. However, earnings deteriorated 7.7% from the prior-year quarter’s level. Net sales increased 5% year over year to $1.04 billion. The figure marginally surpassed the Zacks Consensus Estimate of $1.03 billion.

DENTSPLY SIRONA has an average positive earnings surprise of 4% in the trailing four quarters.

DENTSPLY SIRONA Inc. Price and Consensus


DENTSPLY SIRONA Inc. Price and Consensus | DENTSPLY SIRONA Inc. Quote


Which Way are the Estimates Treading?

For the third quarter, the Zacks Consensus Estimate for EPS is pegged at 46 cents, reflecting a decline of 34.3% year over year. The same for net sales is projected at $951.8 million, hinting at a fall of 5.7% year over year.

R&D Focus to Drive Q3 Results

DENTSPLY SIRONA’s overall growth strategy rests on product innovation and R&D focus, which is likely to drive the top line in the third quarter.

In Europe, new products like WaveOne GOLD, X-Smart iQ, VDW and CONNECT Drive are expected to drive revenues.Growing preventive and restorative product portfolio are expected to drive revenues in the third quarter. The company’s diverse product portfolio and recurring revenue base are key growth catalysts in the long run.

In fact, in the second quarter of 2018, the company’s operating expenses rallied 50 basis points (bps) owing to consistent investments in R&D. We expect the trend to continue in the third quarter as well. For 2018, management expects capital expenditures to be around $200 million, with strong developments in the third quarter. For instance, DENTSPLY SIRONA’s laser team is currently spending a considerable time on innovation. This is likely to drive the company’s share and margin.

However, the company lowered full-year guidance. DENTSPLY SIRONA expects adjusted EPS for 2018 in the range of $2-$2.15 per share, down from the previous projection of $2.55-$2.65. Revenues for 2018 are expected to decline 2% at constant currency (cc) in 2018, down from the previous expectation of 2% growth at cc.

Other Factors to Consider

The company’s CAD/CAM is a dental imaging platform is likely to be a key contributor to third-quarter results.

DENTSPLY SIRONA acquired OraMetrix — a leading industry provider of innovative 3-D technology solutions — in the second quarter of 2018. Post the acquisition, the company has been providing an end-to-end digital workflow to dental professionals. Management confirmed that the company is likely to gain solid traction in the CAD/CAM unit in the third quarter, particularly in the U.S. markets.

However, the Technology & Equipment impairment is likely to post soft revenues and pressed operating margin rates for CAD/CAM as well as Imaging reporting units. Per management, this is because of increasing competitive pressures and reduction in inventory levels.

Earnings Whispers

Per our proven quantitative model, a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to deliver a positive earnings surprise. This is not the case here as you will see below.

Earnings ESP: DENTSPLY SIRONA has an Earnings ESP of +0.98%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: DENTSPLY SIRONA carries a Zacks Rank #4.

Please note that we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is witnessing negative estimate revision.

Stocks Worth a Look

Here are a few medical stocks worth considering as they have the right combination of elements to post an earnings beat this quarter.

ICU Medical, Inc. (ICUI - Free Report) has an Earnings ESP of +8.65% and a Zacks Rank #2.

Quidel Corporation (QDEL - Free Report) has an Earnings ESP of +10.55% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Becton, Dickinson and Company (BDX - Free Report) has an Earnings ESP of +0.43% and a Zacks Rank #3.

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