DENTSPLY SIRONA (XRAY) Beats on Q3 Earnings, Lowers '23 Guidance
DENTSPLY SIRONA Inc. XRAY reported third-quarter 2023 adjusted earnings per share (EPS) of 49 cents, which beat the Zacks Consensus Estimate of 48 cents by 2.1%. The bottom line improved 19.6% on a year-over-year basis.
On a GAAP basis, the company incurred a loss of $1.25 per share compared with a reported loss of $5.01 in the year-ago quarter.
Revenues
Revenues in the reported quarter totaled $947 million, which missed the Zacks Consensus Estimate by 2.6%. The top line was flat year over year but declined 0.3% on an organic basis. Lower demand for implant and imaging products, mainly in the U.S. market, along with soft demand for technology and dental solutions in Europe, led to the decline. However, strong international growth, caused by the recovery in China, helped offset the decline partially.
Business Details
As a part of its restructuring plan, XRAY changed its reporting structure from Apr 1, 2023. The company reported third-quarter results under four new segments — Connected Technology Solutions, Essential Dental Solutions, Orthodontic and Implant Solutions, and Wellspect Healthcare.
While the Connected Technology Solutions segment consists of equipment, instruments and CAD/CAM business, the Orthodontic and Implant Solutions segment includes the implant systems and aligner solutions. These businesses were formerly part of the erstwhile Technologies and Equipment segment.
The Essential Dental Solutions unit includes endodontic, restorative and preventive consumables businesses, earlier part of the former Consumables segment. The Wellspect Healthcare segment includes urology catheters business, earlier part of Technologies & Equipment, and other healthcare-related consumable businesses, previously under the Consumables segment.
Connected Technology Solutions
Revenues in this segment totaled $276 million, down 3.8% year over year and 4.6% on an organic basis. CAD/CAM demand improved in the U.S. market while recessionary concerns led to softer demand in Europe.
Orthodontic and Implant Solutions
Sales in this segment amounted to $252 million, up 2.2% year over year. On an organic basis, net sales improved 0.9%. The growth was driven by SureSmile and Byte sales, coupled with implant growth in China, partially offset by lower lab sales.
Essential Dental Solutions
Sales in this segment amounted to $377 million, down 0.3% year over year. On an organic basis, net sales declined 0.9%. The decline was primarily led by lower volume in Europe, partially offset by the rising demand in international markets.
Wellspect Healthcare
Sales in this segment amounted to $72 million, up 9.9% year over year. On an organic basis, net sales improved 6.8%. Sales were driven by growth across all regions, along with additional revenues from new products.
Revenues by Geography
In the United States, revenues decreased 0.9% year over year organically to $356 million. Rest of World (ROW) revenues increased 4.5% organically to $237 million on a year-over-year basis. Revenues in Europe, however, declined 2.7% to $354 million, organically, during the same time frame.
Margin Analysis
Gross profit in the reported quarter totaled $495 million, down 2.7% on a year-over-year basis. The gross margin came in at 52.2%, which contracted 150 basis points.
Selling, general and administrative expenses totaled $372 million, down 7.2% from the year-ago quarter’s level. Research and development expenses amounted to $46 million, up 12.2% from the prior-year quarter’s number.
Operating loss totaled $236 million compared with $1.22 billion in the year-ago period.
Financial Condition
DENTSPLY SIRONA exited the third quarter of 2023 with cash and cash equivalents of $309 million compared with $295 million at the end of the last reported quarter.
The cumulative net cash provided by operating activities totaled $217 million compared with $375 million in the year-ago period.
DENTSPLY SIRONA Inc. Price, Consensus and EPS Surprise
DENTSPLY SIRONA Inc. price-consensus-eps-surprise-chart | DENTSPLY SIRONA Inc. Quote
2023 Guidance Updated
DENTSPLY SIRONA updated its guidance for 2023 earnings and revenues based on declining sales performance in the third quarter. The company lowered its earlier revenue guidance from organic growth of nearly 3% to 1%. It now expects sales in the band of $3.90-$3.94 billion compared with the previously projected range of $3.98-$4.02 billion. The Zacks Consensus Estimate for the same is pegged at $4 billion. The lowered guidance includes a forex headwind of $25 million.
XRAY now expects adjusted EPS in the band of $1.80-$1.85, down from the previously anticipated range of $1.92-$2.02. The Zacks Consensus Estimate for the same is pegged at $1.97.
Our Take
XRAY’s third-quarter adjusted earnings as well as revenues declined year over year. However, earnings beat the market expectation by a cent. Lower-than-expected revenues raise apprehension. The company also provided a lowered guidance for both top and bottom lines, reflecting a challenging macro-environment, particularly in Germany and the United States. Soft demand in Europe may act as a headwind for the rest of 2023.
Recovery of demand in China will be a key driver of top line going forward. Sales improved 20% during the third quarter in the country following a strong second quarter, reflecting recovery after a prolonged period of weak demand. Moreover, strong demand for aligners and CAD/CAM in the U.S. market will support top-line growth going forward.
Zacks Rank and Stocks to Consider
Currently, DENTSPLY SIRONA has a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader medical space that have announced quarterly results are Abbott Laboratories ABT, DexCom DXCM and Integer Holdings ITGR.
Abbott, carrying a Zacks Rank #2 (Buy) at present, reported third-quarter 2023 adjusted EPS of $1.14, which beat the Zacks Consensus Estimate by 3.6%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Revenues of $10.14 billion outpaced the consensus mark by 3.6%.
Abbott has a long-term estimated growth rate of 5.1%. ABT’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 6.76%.
DexCom reported third-quarter 2023 adjusted EPS of 50 cents, which beat the Zacks Consensus Estimate by 47.1%. Revenues of $975 million beat the Zacks Consensus Estimate by 4%. The company currently carries a Zacks Rank #2.
DXCM has a long-term estimated growth rate of 33.6%. Its earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 36.43%.
Integer Holdings reported third-quarter 2023 adjusted EPS of $1.27 and revenues of $405 million, which beat their respective Zacks Consensus Estimate by 21% and 8.7%. It currently carries a Zacks Rank #2.
ITGR has a long-term estimated growth rate of 15.8%. Its earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 11.98%.
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