DENTSPLY SIRONA Inc. (NASDAQ:XRAY) reported adjusted earnings per share (EPS) of 45 cents in the first quarter of 2018, beating the Zacks Consensus Estimate by 7.1%. However, the metric fell 8.2% year over year.
Net sales increased 6.2% year over year to $956.1 million. Also, the figure surpassed the Zacks Consensus Estimate of $944.7 million. However, the metric declined 1.1% at constant currency (cc) exchange rate.
The stock carries a Zacks Rank #3 (Hold). DENTSPLY’s price movement has been unfavorable over the past year. The stock has lost 23.6% comparing unfavorably with the industry’s rise of 7.9%.
Net sales (Excluding Precious-Metal Impact)
Net sales of the company’s precious-metal dental alloy products, which are used by third parties to construct crown and bridge materials, are subject to risks from fluctuations of precious metal prices.
To avoid the impact of fluctuating prices, DENTSPLY reports net sales with and without precious metal content to show actual performance, independent of precious metal price volatility.
Net sales in the segment were $945.8 million, up 6.3% year over year.
DENTSPLY SIRONA Inc. Price, Consensus and EPS Surprise
Segmental Details
The business is organized into two reporting segments — Dental & Healthcare Consumables and Technologies.
Dental & Healthcare Consumables
The segment comprises preventive, restorative, instruments, endodontic and laboratory dental products as well as consumable medical device products.
Net sales improved 6.2% to $447.8 million in the segment, while it declined 0.4% at cc.
Technologies & Equipment segment
Technologies consist of dental implants, CAD/CAM systems, imaging systems, treatment centers and orthodontic products.
The metric increased 6.1% to $508.3 million in the segment on a year-over-year basis. However, revenues were down 5.8% at cc.
Geographic Details
In the quarter, sales in the United States fell 6.9% to $291.8 million year over year. Revenues in the area fell 7.4% at cc.
Net sales in Europe increased 14.2% to $425.5 million and 0.6% at cc.
Net sales in Rest of World climbed 11.4% to $238.8 million and 5.3% at cc.
Margin Analysis
Gross profit in the reported quarter was $514.1 million, up 4.5% year over year. However, as a percentage of revenues, gross margin contracted 80 basis points (bps) to 53.8%.
Operating income fell 18.4% to $68.7 million in the quarter. Operating margin in the quarter contracted 220 bps to 7.2% of net revenues.
Guidance
Management expects adjusted earnings per share for 2018 in the range of $2.55-$2.65, down from the previous range of $2.70-$2.80. Notably, the Zacks Consensus Estimate for earnings is currently pegged at $2.71 per share, significantly higher than management’s expectations.
Revenues are projected to rise 2% at cc. The Zacks Consensus Estimate for revenues is currently pegged at $4.23 billion.
In Conclusion
DENTSPLY exited the first quarter on a solid note, beating the Zacks Consensus Estimate on both the counts. Robust performance by the company’s flagship dental implants, CAD/CAM systems, imaging systems, treatment centers and orthodontic product platforms hold considerable promise over the long haul. Emerging markets like Asia-Pacific & the Middle East offer healthy growth opportunities on a long-term basis, as they remain vastly untapped with low dental products penetration. The company’s agreements with MedTech bigwig Patterson Companies (NASDAQ:PDCO) in Canada are likely to drive sales. DENTSPLY recently witnessed a rebound in sales in Asia, particularly Japan, and strong growth in Russia.
On the flip side, a lowered guidance is indicative of looming concerns. The company's higher capital expenditure on product development and tough competition are expected to exert pressure on margins. Unfavorable foreign exchange rate and integration risks are major headwinds for the near term.
Q1 Earnings of MedTech Majors at a Glance
A few better-ranked stocks in the broader medical space, which reported solid earnings this season, are Baxter International Inc. (NYSE:BAX) , Varian Medical Systems, Inc. (NYSE:VAR) and Intuitive Surgical, Inc. (NASDAQ:ISRG) .
While Intuitive Surgical and Varian sport a Zacks Rank #1 (Strong Buy), Baxter carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Baxter reported first-quarter 2018 adjusted earnings per share of 70 cents, which beat the Zacks Consensus Estimate by 12.9% and improved from the year-ago quarter’s figure of 58 cents.
Varian reported second-quarter fiscal 2018 adjusted earnings of $1.15 per share, which beat the Zacks Consensus Estimate of $1.06. Adjusted earnings improved 27.8% on a year-over-year basis.
Intuitive Surgical reported adjusted earnings of $2.44 per share, which surpassed the Zacks Consensus Estimate by 22.6%. Revenues totaled $848 million, which beat the Zacks Consensus Estimate by 10.6%.
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Varian Medical Systems, Inc. (VAR): Free Stock Analysis Report
Intuitive Surgical, Inc. (ISRG): Free Stock Analysis Report
Baxter International Inc. (BAX): Free Stock Analysis Report
DENTSPLY SIRONA Inc. (XRAY): Free Stock Analysis Report
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