DENTSPLY Sirona (XRAY): Q1 Strong, Expansion On Track

On Jun 17, we issued an updated research report on NY-based DENTSPLY Sirona Inc. (NASDAQ:XRAY) – a global leader in the design, development, manufacture and marketing of dental consumables and dental laboratory products. The company currently carries a Zacks Rank #3 (Hold).

Post the recent merger with Sirona, DENTSPLY made a promising start to 2016. The company reported a better-than-expected first quarter with both earnings and revenues steering past the Zacks Consensus Estimate. Net sales increased 17.7% on a year-over-year basis to $772.6 million,

Growth at the company was primarily driven by its innovative products like WaveOne GOLD, X-Smart iQ, VDW and CONNECT Drive which are expected to expand customer base in Europe. The DENTSPLY-Sirona merger is expected to generate extensive cost savings ($125 million) by the third year of completion. A strong balance sheet and cash flow statement provide scope for further investments on product development, acquisitions and share repurchases.

DENTSPLY’s dual branding strategy, product innovation, growth opportunities in emerging markets (especially from Asia-Pacific & the Middle East/Africa), diversified product portfolio and recurring revenue base are key growth catalysts. The company provided a positive guidance, with revenue growth projected at 4% to 6% at constant currency for full-year 2016. Adjusted earnings are forecasted in the band of $2.70 to $2.80 per share.

On the flip side, apart from a series of macroeconomic headwinds, currency fluctuation continues to be the major dampener for the stock. In fact, strengthening of the U.S. dollar against Euro and other emerging market currencies impacted the company’s growth trajectory. A persistent decline in sales, accompanied by higher capital expenditure for product development kept margins under pressure.

Stocks to Consider

Better-ranked stocks in the same space include Halyard Health (NYSE:HYH) , CR Bard (NYSE:BCR) and CONMED Corporation (NASDAQ:CNMD) . Halyard Health sports a Zacks Rank 1 (Strong Buy) while the other two stocks carry a Zacks Rank #2 (Buy).