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Why Is Dentsply (XRAY) Up 3.9% Since Last Earnings Report?

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It has been about a month since the last earnings report for Dentsply International (XRAY - Free Report) . Shares have added about 3.9% in that time frame, outperforming the S&P 500.

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

DENTSPLY Q1 Earnings Top Estimates, EPS View Narrowed
 
DENTSPLY reported adjusted earnings per share (EPS) of 49 cents in the first quarter of 2019, beating the Zacks Consensus Estimate of 38 cents. The bottom line also shot up by 8.9 % from the prior-year quarter.
 
The company’s revenues declined 1% year over year to $946.2 million but surpassed the Zacks Consensus Estimate of $917.1 million.
 
Business Details
 
Net sales Excluding Precious Metal Content
 
Net sales, excluding precious metal content, came in at $935 million, down 1.1% year over year.
 
For investors’ notice, DENTSPLY’s precious-metal dental alloy products — used by third parties to construct crown and bridge materials — are subject to certain risks of price fluctuations.
 
Technology & Equipment
 
Per management, Technology & Equipment revenues rose 2.1% year over year in the first quarter. Notably, revenues in the segment totaled $520.8 million.
 
Consumables
 
DENTSPLY’s Consumable revenues declined 4.6% year over year to $425.4 million in the reported quarter.
 
Revenues by Geography
 
Revenues from the United States totaled $313.4 million, which increased 7.4% year over year.
 
In Europe, revenues declined 7% on a year-over-year basis to $395.8 million in the first quarter, owing to unfavorable currency movements.
 
Revenues from the Rest of the World (ROW) also dropped 0.8% to $237 million.
 
Margin Analysis
 
Gross profit in the reported quarter amounted to $499.7 million, down 2.8% on a year-over-year basis. Gross margin was 52.8%, down 100 bps.
 
Excluding precious metal content, gross margin came in at 53.4%, which also contracted 100 bps.
 
Operating income totaled $47.3 million, down significantly by 31.1% year over year.
 
Operating margin in the quarter was 5%, down 220 bps from the year-ago period.
 
Excluding precious metal content, adjusted operating margin came in at 5.1%, down 220 bps in the first quarter.
 
Financial Condition
 
DENTSPLY exited the first quarter with cash and cash equivalents of $225.4 million. Operating cash flow amounted to $29.3 million in the quarter under review.
 
Guidance
 
The company narrowed the 2019 adjusted EPS view.
 
Notably, adjusted EPS is now expected in the range of $2.30 to $2.40, compared with the previous guidance range of $2.25 to $2.40.
 
On a reported basis, revenues are expected within $3.95 to $4.05 billion. However, foreign exchange headwinds are expected to impact the company’s top line by $110 million in 2019. Moreover, portfolio streamlining initiatives that have already been implemented are anticipated to reduce 2019 revenues by approximately $70 million.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month.

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. Charting a somewhat similar path, 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

Dentsply has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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