DENTSPLY (XRAY) Scales A 52-Week High On Strong Q1 Results

Shares of DENTSPLY International Inc. (NASDAQ:XRAY) rallied to a new 52-week high of $64.59 on Jun 9 and closed a tad bit lower at $64.43. This represents a strong one-year return of approximately 22.1%, much better than the S&P 500’s return of -0.5% over the same period.

Currently, DENTSPLY has a Zacks Rank #3 (Hold). The stock has a market cap of $14.70 billion and a long-term expected earnings growth rate of 11.1%.

Growth Catalysts

DENTSPLY reported impressive first-quarter 2016 results. Adjusted earnings of 69 cents per share comfortably beat the Zacks Consensus Estimate by 6 cents. Earnings improved almost 17% on a year-over-year basis, primarily driven by strong top-line growth and margin expansion.

DENTSPLY provided a positive guidance. For full-year 2016, the company expects revenue growth of 4% to 6% at constant currency, driven by growth in both of its segments. Adjusted earnings are forecasted in the band of $2.70 to $2.80 per share.

We believe that the combined entity will benefit from revenue and cost synergies in 2016 and beyond. Also, the emerging markets provide significant opportunities for the company as these areas are vastly untapped with low dental products penetration.

However, integration will be a risk in the near term. Additionally, higher capital expenditure on product development coupled with persistent decline in sales is expected to put margins under pressure.

Estimate Revisions

However, the positives outweigh the negatives as evident from the recent estimate revisions. The Zacks Consensus Estimate for fiscal 2016 increased a penny to $2.75 over the last 30 days. Similarly, fiscal 2017 estimate increased by a penny to $3.10 over the same period.

Key Picks

Better-ranked stocks in the broad medical sector include Masimo Corp (NASDAQ:MASI) , IRadimed (NASDAQ:IRMD) and Exactech (NASDAQ:EXAC) . While Masimo sports a Zacks Rank #1 (Strong Buy), IRadimed and Exactech have a Zacks Rank #2 (Buy).