DENTSPLY (XRAY) Down 11.8% Since Earnings Report: Can It Recover?

A month has passed since the company’s last earnings report DENTSPLY SIRONA Inc. XRAJ. Shares have lost about 11.8% in that time.

Will the recent negative trend continue into its next earnings release, or is XRAY poised for a breakout? Before we dive into how investors and analysts have reacted recently, let’s take a quick look at the latest earnings report to better understand the important factors.

Latest earnings

DENTSPLY reported first-quarter 2018 adjusted earnings per share (EPS) of 45 cents, which was 7.1% ahead of the Zacks Consensus Estimate. However, this indicator decreased by 8.2% year-on-year.

Net sales increased 6.2% year-over-year to $956.1 million. Additionally, the figure surpassed the Zacks Consensus Estimate of $944.7 million. However, this rate decreased by 1.1% at constant currency exchange rates (cc).

Net sales (excluding precious metals)

The company’s net sales of dental alloy products containing precious metals, used by third parties to construct crown and bridge materials, are subject to risks related to fluctuations in precious metal prices.

To avoid the influence of price fluctuations, DENTSPLY reports net sales with and without precious metal content to show actual results, regardless of the volatility of precious metal prices.

Net sales in this segment were $945.8 million, up 6.3% year over year.

The company’s operations are divided into two reporting segments – consumables and technologies for the dental and healthcare sectors.

Consumables for dental and medical use

The segment includes preventive and restorative dental products, instruments, endodontic and laboratory products, as well as disposable medical devices.

Net sales in this segment increased by 6.2% to USD 447.8 million, while at the cc level they decreased by 0.4%.

Technology and Equipment Segment

These technologies include dental implants, CAD/CAM systems, imaging systems, treatment centers and orthodontic products.

The ratio increased 6.1% to USD 508.3 million in the segment on a year-over-year basis. However, revenues declined by 5.8% cc.

Geographic details

For the quarter, U.S. sales declined 6.9% to $291.8 million year-over-year. Revenues in this area decreased by 7.4% cc.

Net sales in Europe increased by 14.2% to $425.5 million and 0.6% in cm3.

Rest of the World net sales increased 11.4% to $238.8 million and 5.3% in cm3.

Margin analysis

Gross profit for the reported quarter was $514.1 million, up 4.5% year over year. However, as a percentage of revenue, gross margin declined 80 basis points (bps) to 53.8%.

Operating income decreased 18.4% to $68.7 million in the quarter. Operating margin in the quarter contracted 220 bps to 7.2% of net revenue.

Conductivity

Management expects 2018 adjusted earnings per share to be $2.55-$2.65, down from the previous range of $2.70-$2.80.

Revenues are expected to grow by 2% at the cc level.

How have estimates changed since then?

Investors have witnessed a downward trend in new estimates over the past month, with nine downward revisions made in the current quarter.

DENTSPLY SIRONA Inc. Price and consensus

DENTSPLY SIRONA Inc. Price and consensus | DENTSPLY SIRONA Inc. Offer

VGM results

Currently, XRAY has a solid growth score of B, but its momentum is performing slightly better at A. The stock is rated C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has a Composite VGM Score of B. If you’re not focused on a single strategy, this rating should interest you.

Our results show that these shares are primarily suitable for dynamic investors, as well as for those who expect growth and, to a lesser extent, value.

Perspectives

Estimates for the stock are trending lower, and the scale of these revisions indicates a shift downward. It’s no surprise that XRAY has a Zacks Rank #4 (Sell). We expect below-average returns for stocks over the next few months.

Want the latest recommendations from Zacks Investment Research? Today you can download the top 7 stocks for the next 30 days. Click to get this free report

DENTSPLY SIRONA Inc. (XRAY): Free stock analysis report

To read this article on Zacks.com, click here.

Zacks Investment Research