DENTSPLY SIRONA (XRAY) at a 52-Week High: What's Driving It?
Shares of DENTSPLY SIRONA, Inc. XRAY reached a new 52-week high of $62.22 on Mar 8, before closing the session marginally lower at $ 61.90. The stock has rallied 16.7% since its fourth-quarter earnings announcement on Mar 1.
The company is witnessing an upward trend in its stock price, prompted by its robust performance in the fourth quarter despite pandemic-led disruption. DENTSPLY SIRONA’s strategic acquisition of Byte, a rapidly-growing direct-to-consumer, doctor-directed clear aligner company, is a major plus. However, year-over year decline in technologies and equipment revenues and exposure to currency movements are concerning.
Let’s delve deeper.
Impressive Q4 Performance: DENTSPLY SIRONA’s strong performance in the fourth quarter buoys optimism. Following two successive quarters of sales debacle, there was a strong rebound in the fourth quarter reflecting a gradual recovery in the dental market. Consumable revenues rose organically in the reported quarter on robust sales in the United States and Europe. Recent strategic buyouts of Byte and Datum contributed to the reported growth. The launch of the Axeos imaging system instills investor optimism. Markets seem to be optimistic about the company’s solid 2021 revenue guidance with projected growth of 20-30% over 2020.
Other Growth Drivers
Strategies to Combat COVID-19 Mayhem: DENTSPLY’s SIRONA is working continuously to reduce the impact of pandemic disruption on its business. The company is fortifying its foothold in the highly-competitive MedTech space with high-end products like PrimeScan and GP Ortho software. A growing preventive and restorative product portfolio is expected to drive market expansion in the continent. Further, DENTSPLY SIRONA is undertaking a range of restructuring actions to accelerate revenue growth, expand margins and simplify business. These actions instill optimism in the stock amid this uncertain scenario.
Potential of CAD/CAM: DENTSPLY’s CAD/CAM is a dental imaging platform and a major foundation in global dental markets. Per research, the global dental CAD/CAM market will witness a CAGR of more than 8% by the end of 2021. In a bid to strengthen its CAD/CAM-based dental unit, DENTSPLY SIRONA acquired Byte to provide a boost to Technologies & Equipment segment. Recently, the company acquired Datum Dental which has added its proprietary technology GLYMATRIX and its strong OSSIX biomaterial to the digital dentistry portfolio.
Downsides
Decline in Technologies & Equipment Segment: In fourth-quarter 2020, DENTSPLY’s Technologies & Equipment revenues declined 5.4% year over year in the reported quarter. On an organic basis, net sales fell 6.2%.
Foreign Exchange Headwinds: DENTSPLY has significant international presence. Therefore, a strengthening U.S. dollar, especially against the euro, as well as emerging market currencies negatively impacts the company’s results. The company faces significant pricing pressure due to intensifying competition. Foreign exchange volatility is expected to present a major headwind in the coming quarters as well.
Zacks Rank and Other Key Picks
Currently, DENTSPLY SIRONA carries a Zacks Rank #2 (Buy).
A few same-ranked stocks from the broader medical space are The Cooper Companies, Inc. COO, Invacare Corporation IVC and McKesson Corporation MCK. You can see the complete list of Zacks #1 Rank stocks here.
The Cooper Companies currently carries a Zacks Rank #2 and has a projected long-term earnings growth rate of 11%.
Invacare currently carries a Zacks Rank #2 and has an estimated long-term earnings growth rate of 57%.
McKesson currently carries a Zacks Rank #2 and has a projected long-term earnings growth rate of 7%.
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