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Align Technology (ALGN) Earnings Beat in Q4, Margins Rise

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Align Technology, Inc.’s ALGN fourth-quarter 2019 earnings per share (EPS) were $1.53, reflecting a 27.5% increase from a year ago. The figure beat the Zacks Consensus Estimate by 10.1%.

For 2019, EPS came in at $5.53, showing a year-over-year increase of 12.4%. The figure surpassed the Zacks Consensus Estimate by 2.6%.

Revenues

Revenues grew 21.7% year over year to $649.8 million in the quarter, surpassing the Zacks Consensus Estimate by 0.6%.

The robust top-line performance was led by double-digit increase in Invisalign case shipments from the year-ago quarter. Moreover, increased revenues from iTero scanner contributed substantially.

For the full year, revenues totaled $2.41 billion, up 22.4% from the year-ago number. The figure beat the Zacks Consensus Estimate by a marginal 0.4%.

Segments in Detail

In the fourth quarter, revenues at the Clear Aligner segment rose 22% year over year to $543.6 million. Within the segment, Invisalign case shipments amounted to 413.7 thousand, up 23.9% year over year. The upside was primarily driven by continued adoption by teenage and younger patients as well as increased utilization among orthodontists and expansion of the company’s global customer base.

Align Technology, Inc. Price, Consensus and EPS Surprise

 

Align Technology, Inc. Price, Consensus and EPS Surprise

 

Align Technology, Inc. price-consensus-eps-surprise-chart | Align Technology, Inc. Quote

During the quarter, Invisalign volumes were up 19.3% and 30.1% year over year in the Americas and International regions, respectively. Invisalign volume for teenage patients was 116,000 cases, up 33.1% year over year.

Revenues from Scanner and Services improved a significant 20.2% to $106.2 million on increased sales of iTero scanner and services.

Margins

Gross margin in the quarter under review expanded 89 basis points (bps) year over year to 72.6% despite a 17.8% rise in cost of net revenues.

During the quarter, Align Technology witnessed a 23.2% year-over-year increase in selling, general and administrative expenses to $279.5 million and a 15.4% rise in research and development expenses to $41.3 million. However, operating margin expanded 70 bps to 23.3% in the quarter under review.

Financial Details

At the end of the fiscal year, Align Technology had cash, cash equivalents and short-term marketable securities of $868.6 million, compared with $744.5 million at the end of fiscal 2018.

At the end of 2019, net cash provided by operating activities was $747.2 million, compared with $554.7 million at the end of the year-ago period.

In the reported quarter, Align Technology repurchased 389,000 stocks under its accelerated stock repurchase agreement (introduced in July 2019). The company currently has approximately $100 million left under its May 2018 repurchase program.

Q1 Guidance

For the first quarter of 2020, the company projects EPS of $1.19 to $1.28 on revenues of $615 million to $630 million, (indicating 12-15% growth from a year ago). The company estimates Invisalign case shipments in the band of 396,000-406,000, suggesting a 13% to 16% rise from a year ago.

Meanwhile, the Zacks Consensus Estimate for first-quarter EPS is pinned at $1.44 on revenues of $658.9 million. Both earnings and revenue estimates lie above the company's respective projected bands.

Our Take

We are upbeat about Align Technology’s continued momentum in Invisalign volumes across all geographies. We are also encouraged by the solid adoption of Invisalign treatment across the teenage patient market. The expansion of Invisalign customer base, which totaled 67,000 active doctors worldwide in the fourth quarter, buoys optimism. The company also registered solid uptick in its Scanner and Services revenues. On the flip side, operating costs rose considerably in the fourth quarter.

Zacks Rank and Key Picks

Align Technology currently has a Zacks Rank 3 (Hold). Some better-ranked stocks in the broader medical space are SeaSpine Holdings Corporation SPNE, STERIS plc STE and DexCom, Inc. (DXCM - Free Report) , all three carrying a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for SeaSpine’s fourth-quarter 2019 revenues is pegged at $43.6 million, suggesting 14.7% growth from the prior-year reported figure. The same for loss per share is anticipated at 44 cents, implying a 16.9% improvement from the year-ago reported number.

The Zacks Consensus Estimate for STERIS’ third-quarter fiscal 2020 revenues is pegged at $749.7 million, hinting at a 7.7% increase from the year-earlier reported figure. The same for adjusted earnings per share stands at $1.43, indicating a 13.5% rise from the year-ago reported figure.

The Zacks Consensus Estimate for DexCom’s fourth-quarter 2019 revenues is pegged at $457 million, suggesting 35.2% growth from the prior-year reported figure. The same for adjusted earnings per share stands at 72 cents, implying a 33.3% improvement from the year-earlier reported figure.

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