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Align Technology (ALGN) Q2 Earnings Top Estimates, 2021 View Up

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Align Technology, Inc.’s ALGN second-quarter fiscal 2021 adjusted earnings per share (EPS) were $3.04 against the loss of 35 cents per share a year ago. The metric surpassed the Zacks Consensus Estimate by 20.6%.

GAAP EPS for the quarter was $2.51 against the year-ago loss per share of 52 cents.

Revenues

Revenues surged 186.9% year over year to a record $1.01 billion in the quarter, beating the Zacks Consensus Estimate by 7.3%.

Continued momentum in Invisalign Clear Aligners and iTero scanners sales volumes during the fiscal second quarter drove the top line.

Segments in Detail

In the first quarter, revenues at the Clear Aligner segment rose 181.9% year over year to $841 million due to strength in both adult and teen market segments as well as across products and customer channels, especially in Americas and the EMEA region. Within the segment, Invisalign case shipments amounted to 665,600, up 200% year over year.

During the quarter, Clear Aligner volumes rose 260.7% and 149.2% year over year in the Americas and International regions, respectively.

Clear Aligner volume for teenage patients was 181 thousand cases, up 156.3% year over year, representing one-third of total cases shipped, with strong growth from North America and EMEA orthodontists.

Align Technology, Inc. Price, Consensus and EPS Surprise

Align Technology, Inc. Price, Consensus and EPS Surprise
Align Technology, Inc. Price, Consensus and EPS Surprise

Align Technology, Inc. price-consensus-eps-surprise-chart | Align Technology, Inc. Quote

Revenues from Imaging Systems & CAD/CAM Services surged 214.7% to $169.8 million in the quarter due to product mix, and increased services revenues from the company’s larger installed base and exocad's CAD/CAM services. Sequentially, the company’s revenues recorded an uptick of 20%. The company also recorded continued momentum with the iTero Element 5D Imaging System Plus Series of next-generation scanners and imaging systems (launched in February 2021).

Margins

Gross profit in the fiscal second quarter was $758.5 million, reflecting an improvement of 238.1% year over year. Gross margin in the quarter under review expanded 1137 basis points (bps) year over year to 75% despite a 97.1% uptick in cost of net revenues.

During the quarter, Align Technology witnessed a 68.1% year-over-year increase in selling, general and administrative expenses to $431.9 million and a 42.9% rise in research and development expenses to $57.7 million.

Operating income in the quarter under review was $268.9 million against operating loss of $73 million in the year-ago quarter.

Financial Details

Align Technology exited the second quarter of fiscal 2021 with cash, cash equivalents of $1.09 billion compared with $1.13 million at the end of the first quarter.

Cumulative net cash provided by operating activities at the end of the second quarter of 2021 was $544.7 million compared with $69.7 million a year ago.

Under the $1-billion repurchase program announced in May 2021, the company has $900 million remaining available for repurchase of common stock.

2021 Guidance

Align Technology, on the back of its impressive performance, has raised its financial outlook for 2021.

The company now expects revenues for the year in the range of $3.85 billion to $3.95 billion, suggesting a rise of 56-60% from 2020. The previous provided guided range was $3.7-$3.9 billion. The Zacks Consensus Estimate for the same is pegged at $3.80 billion.

The company expects revenue growth in the second half of 2021 to exceed the mid-point of its long-term operating model target of 20% to 30%.

Our Take

Align Technology exited the second quarter of fiscal 2021 with better-than-expected results despite the challenging business environment. The company reported solid revenue growth in the quarter under review, reflecting continued momentum from both Clear Aligners and Systems and Services. Continued adoption of the company’s digital platform has also been looking impressive. The company is witnessing strong growth in iTero business across all regions with continued adoption of the iTero Element 5D Plus Series of next-generation scanners and imaging systems. Moreover, Clear Aligner volumes witnessed strong growth during the quarter on strength in both adult and teen market segments. Impressive international performance across geographies and increased shipment volumes buoy optimism on the stock. Robust gross margin expansion and year-over-year improvement in operating income look encouraging. The company has raised its full-year 2021 outlook, which is indicative of the continuation of this bullish trend.

However, the pandemic-led continued choppy market conditions remain a concern for the company. Foreign exchange impacts, overdependence on Invisalign and tough competition persist.

Zacks Rank and Stocks to Consider

The company currently carries a Zacks Rank #3 (Hold).

Some better-ranked medical stocks, which are expected to report earnings soon, are AMN Healthcare Services Inc AMN, Catalent, Inc. CTLT and West Pharmaceutical Services, Inc. WST.

The Zacks Consensus Estimate for AMN Healthcare’s second-quarter 2021 adjusted EPS is currently pegged at $1.47. The consensus estimate for second-quarter revenues is pegged at $829.4 million. The company currently carries a Zacks Rank #2 (Buy).

Catalent currently sports a Zacks Rank #1 (Strong Buy). The Zacks Consensus Estimate for its fourth-quarter fiscal 2021 adjusted EPS is currently pegged at $1.04. The consensus estimate for fourth-quarter revenues is pegged at $1.13 billion. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for West Pharmaceutical’s second-quarter 2021 adjusted EPS is currently pegged at $1.74. The consensus mark for its revenues stands at $665.6 million. The company carries a Zacks Rank #2.


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