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Here's Why Investors Should Hold DENTSPLY (XRAY) Stock Now

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DENTSPLY SIRONA Inc. (XRAY - Free Report) has been a leading name in the U.S. MedTech space. Currently, the company has a market capitalization of approximately $8.43 billion. However, sluggishness in the European business is concerning.

In a month’s time, this Zacks Rank #3 (Hold) stock has gained 2.9% against the industry’s decline of 11.1% and the S&P 500’s decrease of 8.9%.

 

Here we take a quick look at the major headwinds that are plaguing DENTSPLY and discuss the factors that ensure near-term recovery.

Why Should You Retain DENTSPLY?

DENTSPLY’s CAD/CAM is a dental imaging platform. It has been a major foundation in global dental markets. CAD/CAM is a field of dental supplies and prosthodontics using computer-aided design and computer-aided manufacturing technologies. Per Technavio, the global dental CAD/CAM market will witness a CAGR of more than 8% by 2021. We believe that DENTSPLY is likely to benefit from these trends.

In a bid to strengthen its CAD-CAM-based dental unit, DENTSPLY acquired OraMetrix — a leading industry provider of innovative 3-D technology solutions. The company also offers an advanced CAD platform developed for dental professionals to deliver predictable orthodontic outcomes consistently.

Post the acquisition, DENTSPLY will be able to provide an end-to-end digital workflow to dental professionals and address the increasing demands for aesthetics. In fact, the OraMetrix buyout is likely to strengthen DENTSPLY’s footprint in the global dental industry. It will also introduce a comprehensive orthodontic offering that will include a ‘full arch clear-aligner’ solution for DENTSPLY.

Wellspect, which serves the hydrophilic CIC market, performed impressively in the third quarter, up mid-single digits.

What’s Deterring the Stock?

DENTSPLY has been witnessing sluggishness in the European business. In the third quarter, revenues declined 9.8% on a year-over-year basis to $348.8 million in Europe. The downside can be primarily attributed to the revenue shortfall due to Venlo and some softness in the equipment markets in Central Europe.

The lackluster revenue performance is also because of $20 million reduction in Consumable revenues, resulting from a startup challenge in the new central distribution hub in Europe.

Which Way are the Estimates Treading?

For the fourth quarter, the Zacks Consensus Estimate for earnings is pegged at 54 cents, reflecting a decline of 34.2% on a year-over-year basis. The same for the revenues stands at $1.02 billion, mirroring a 6.9% decrease year over year.

For 2018, the Zacks Consensus Estimate for revenues is pegged at $3.94billion. The same for adjusted earnings stands at $1.97, down 25.9% year over year.

Key Picks

A few better-ranked stocks in the broader medical space are Veeva Systems Inc (VEEV - Free Report) , Integer Holdings Corporation (ITGR - Free Report) and OPKO Health, Inc (OPK - Free Report) .

Veeva Systems’ long-term earnings growth rate is projected at 19.5%. The stock currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Integer surpassed the Zacks Consensus Estimate in the trailing four quarters, the average being 9.7%. It currently carries a Zacks Rank #2 (Buy).

OPKO Health’s long-term earnings growth rate is projected at 12%. The stock sports a Zacks Rank of 1.

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