Yahoo Finance Why Is Dentsply (XRAY) Up 1% Since Last Earnings Report?
It has been about a month since the last earnings report for Dentsply International (XRAY). Shares have added about 1% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Dentsply due for a pullback? 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 drivers.
DENTSPLY SIRONA Q3 Earnings & Revenues Miss Estimates
DENTSPLY SIRONA reported third-quarter 2022 adjusted earnings per share (EPS) of 41 cents, missing the Zacks Consensus Estimate of 59 cents by 30.5%. The bottom line declined 31.5% on a year-over-year basis.
On a GAAP basis, the company incurred a loss of $5.01, reflecting an improvement of 4.4% from the year-ago quarter. The company recorded a non-cash charge for the impairment of goodwill and intangible assets of $1.1 billion net of tax. The charge reflected the impact of macroeconomic factors as a result of weakened global demand, higher cost of capital, unfavorable foreign currency impacts, and increased raw material, supply chain and service costs.
Revenues
Revenues in the quarter under review amounted to $947 million, missing the Zacks Consensus Estimate by 8.1%. The top line decreased 8.9% year over year. Sales were down 0.7% on an organic basis.
Management stated that it is encouraged by the double-digit growth in clear aligners, solid performance in Europe, and continued strong demand for Imaging equipment amid continued macroeconomic headwinds, including foreign currency impacts, global supply chain challenges, and regional softness in the United States and China. However, management was not satisfied with the results and stated that it has initiated a comprehensive review of the entire business to improve execution, build a winning portfolio and return to growth.
Business Details
Consumables
Revenues of the Consumables segment fell 8.7% year over year and 2.5% on an organic basis in the third quarter to $391 million. Per management, the decline was led by softening demand in the United States and China, partially offset by the demand for preventive consumables.
Technologies & Equipment
Technologies & Equipment’s revenues were down 9% year over year to $556 million in the reported quarter. On an organic basis, net sales rose 0.6%. Higher demand for clear aligners and imaging equipment drove organic revenues, partially offset by lower CAD/CAM volumes.
Revenues by Geography
In the United States, revenues decreased 7.2% year over year to $357 million. Rest of World revenues fell 11.6% year over year to $232 million. European revenues declined 8.8% year over year to $358 million. However, sales were up 3% and 0.1% organically in the European and Rest of the World markets, respectively. Organic sales declined 5.2% in the U.S. market.
Margin Analysis
Gross profit in the reported quarter amounted to $508 million, down 10.7% on a year-over-year basis. The gross margin was 53.6%, contracting 110 basis points.
Selling, general and administrative expenses were $401 million, up 1.5% from the year-ago quarter. Research and development expenses amounted to $41 million, up 5.1% from the prior-year quarter.
Operating loss was $1.22 billion against an operating income of $132 million in the year-ago quarter.
Financial Condition
DENTSPLY SIRONA exited the third quarter of 2022 with cash and cash equivalents of $418 million, up from $339 million at the end of December 2021.
Cumulative net cash provided by operating activities at the end of the third quarter was $375 million compared with $435 million in the year-ago period.
2022 Guidance
DENTSPLY SIRONA lowered its guidance for revenues and EPS in 2022 to reflect the adverse impact of macroeconomic headwinds. The company now projects 2022 revenues within $3.85-$3.88 billion, down from $4.1-$4.2 billion. The Zacks Consensus Estimate for the same is pegged at $4.05 billion. The outlook includes an organic sales decline of approximately 2%.
The company expects an adjusted EPS of $1.90-$2.00, down from the previous guidance of $2.35-$2.55. The Zacks Consensus Estimate for the same stands at $2.35.
Our Take
DENTSPLY SIRONA ended the third quarter on a weak note, wherein both earnings and revenues missed the consensus mark. The company saw continued strong demand for Imaging equipment during the quarter as well as in European businesses. However, the ongoing macro headwinds impacted third-quarter results adversely, which is likely to continue for the rest of 2022. Weakness in the U.S. markets is also discouraging.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
The consensus estimate has shifted -47.83% due to these changes.
VGM Scores
Currently, Dentsply has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. 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. It's no surprise Dentsply has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
Performance of an Industry Player
Dentsply belongs to the Zacks Medical - Dental Supplies industry. Another stock from the same industry, Cardinal Health (CAH), has gained 5.3% over the past month. More than a month has passed since the company reported results for the quarter ended September 2022.
Cardinal reported revenues of $49.6 billion in the last reported quarter, representing a year-over-year change of +12.8%. EPS of $1.20 for the same period compares with $1.29 a year ago.
Cardinal is expected to post earnings of $1.15 per share for the current quarter, representing a year-over-year change of -9.5%. Over the last 30 days, the Zacks Consensus Estimate has changed -2.4%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #2 (Buy) for Cardinal. Also, the stock has a VGM Score of A.
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DENTSPLY SIRONA Inc. (XRAY) : Free Stock Analysis Report
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