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Dentsply (XRAY) Down 2.3% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Dentsply International (XRAY - Free Report) . Shares have lost about 2.3% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Dentsply 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 catalysts.

DENTSPLY Q2 Earnings Beat Estimates, 2019 EPS Guidance Raised

DENTSPLY reported adjusted earnings per share (EPS) of 66 cents in the second quarter of 2019, beating the Zacks Consensus Estimate of 62 cents. The bottom line rose 10% from the prior-year quarter.

The company’s revenues declined 3.1% year over year to $1.01 billion and lagged the Zacks Consensus Estimate of $1.03 billion. Per management, internal sales growth was 3%.

Business Details

Net sales Excluding Precious Metal Content

Net sales, excluding precious metal content, came in at $1 billion, down 3.1% 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 0.9% year over year in the second quarter. Revenues in the segment totaled $558.4 million.

Consumables

DENTSPLY’s Consumable revenues declined 7.8% year over year to $451 million in the reported quarter.

Revenues by Geography

In the United States, revenues fell 2.6% and 1.5% on an internal basis. Rest of World revenues declined 6.9% on a reported basis but grew 2.4% on an internal sales growth basis. European revenues declined 1.1% with foreign exchange accounting for 6.9% of the European revenue decline. However, on an internal sales growth basis, European revenues increased 7.1%.

Margin Analysis

Gross profit in the reported quarter amounted to $540.8 million, down 2.2% on a year-over-year basis. Gross margin was 53.6%, up 60 basis points (bps).

Excluding precious metal content, gross margin came in at 54.1%, which also expanded 60 bps.

Operating income totaled $67.5 million, improving significantly from an operating loss in the year-ago quarter. Operating margin in the quarter was 0.7%.

Financial Condition

DENTSPLY exited the second quarter with cash and cash equivalents of $250.1 million.

Guidance

For 2019, DENTSPLY continues to expect revenues within $3.95-$4.05 billion. This represents internal sales growth of 4% and 5%.

However, portfolio shaping initiatives and continued acquisitions are expected to reduce 2019 revenues by $60 million.

The company also raised the 2019 guidance range for adjusted EPS to $2.35-$2.45 from the previous range of $2.30 to $2.40.

Adjusted operating margin is expected between 18% and 19%, up from the previously communicated range of 17-18%.

The company expects operating expenses below 2018 levels.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted -5.82% due to these changes.

VGM Scores

Currently, Dentsply has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, 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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