Dentsply (XRAY) Up 22.2% Since Last Earnings Report: Can It Continue?

A month has gone by since the last earnings report for Dentsply International (XRAY). Shares have added about 22.2% 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 the most recent earnings report in order to get a better handle on the important drivers.

DENTSPLY SIRONA Posts Weak Q1 Preliminary Results

DENTSPLY SIRONA Inc. reported preliminary first-quarter 2020 adjusted earnings per share of 43 cents. The Zacks Consensus Estimate for earnings is pegged at 41 cents. Going by this preliminary announcement, the bottom line declined 12.2% from the prior-year quarter.

Per the preliminary results, the company’s revenues came in at $874.3million, down 7.6% from the year-ago quarter. The consensus mark for revenues is pegged at $876.9 billion. Per management, internal sales declined 4.3%.

Business Details

Following are the preliminary segment results for the quarter under review:

Consumables

Consumable revenues were down 16.8% year over year and 15.2% on an internal basis in the first quarter to $354 million. Per management, decline in organic sales stemmed from lower demand across all three regions due to lower visits by dentists and customers and procedures owing to the COVID-19 pandemic.

Technologies & Equipment

Technologies & Equipmentrevenues slipped 0.1% year over year to $520.3 million in the reported quarter. On an internal basis, sales rose 4.8%. Per management, digital dentistry and healthcare witnessed solid organic sales growth in the quarter under review, partially offset by decrease in organic sales in Equipment & Instruments and Implants.

Revenues by Geography

Per the preliminary announcement, in the United States, revenues fell 1.4% to $300.5 million and 1.2% internally. Rest of World revenues declined 15.3% year over year to $200.7 million. Revenues in the geography decreased 12% on an internal sales growth basis. European revenues declined 5.7% year on year to $373.1 million. On an internal sales growth basis, European revenues declined 2%.

Margin Analysis

Per the preliminary results, adjusted gross profit in the reported quarter amounted to $498.1million, down 7.8% on a year-over-year basis. Adjusted gross margin was 57%, down10 basis points (bps).

Adjusted operating income totaled $130.7 million, down 10.2% year over year. Adjusted operating margin down 50 bps in the quarter to 14.9%.

Financial Condition

Per the preliminary announcement, DENTSPLY SIRONA exited the first quarter with cash and cash equivalents of $235.9 million, down 41.8% from $404.9 million at the year-end 2019.

2020 Guidance

According to the preliminary announcement, due to the uncertainty regarding the duration and impact of the COVID-19 pandemic on the company’s business, the company has withdrawn previously issued 2020 guidance.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -109.99% due to these changes.

VGM Scores

At this time, Dentsply has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. 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.

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