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DENTSPLY SIRONA (XRAY) Q1 Earnings: What's in the Cards?

Zacks Equity Research

DENTSPLY SIRONA Inc. XRAY is scheduled to release first-quarter 2019 results on May 3, before the opening bell.

In the last reported quarter, the company delivered a positive earnings surprise of 7.4%. Further, it has an average four-quarter positive surprise of 0.2%.

Let’s take a look at how things are shaping up prior to this announcement.

Which Way are Q1 Estimates Treading?

For the first quarter, the Zacks Consensus Estimate for revenues is pegged at $917.1 million, indicating a decline of 4.1% from the year-ago quarter. The consensus estimate for the bottom line is pegged at 38 cents, suggesting a fall of 15.6% from the year-ago reported figure.

Factors to Influence Q1

DENTSPLY SIRONA’s overall growth strategy depends on product innovation, and research and development (R&D) focus, which is likely to drive sales in the first quarter. This apart, solid track record of innovation and a dedicated, passionate workforce might contribute to the overall performance.

The company might have experienced growth in Consumables revenues in the to-be-reported quarter, backed by recovery of the operational issues at the European Distribution Center in Venlo, Netherlands. Further, the company is likely to witness better performance at Technology & Equipment in the first quarter, which can partly be attributed to resolution of the 2018 inventory destocking and introduction of substantial innovations.

The company is likely to have reported higher European revenues, primarily driven by solid consumable sales and recovery from the Venlo distribution center. This apart, the company’s global platform helps it to benefit from faster growing international markets. This in turn, might have resulted in higher world revenues in the to-be-reported quarter.

Per management, the company might record lower revenues in the first quarter, compared with the year-ago quarter owing to dentists putting a pause on purchases until the Biannual International Dental Show (held in March).

For 2019, however, the company estimates revenues to range between $3.95 billion and $4.05 billion, representing an underlying growth of 4-5% over 2018. Further, a recovery from the 2018 dealer destocking is anticipated to positively impact 2019 revenues by 2.5%.

According to the company’s restructuring plan, one of the priorities is to expand margins. One of the ways is through portfolio shaping. The company is utilizing the opportunities to exit underperforming businesses, consequently reducing cost and complexity.

The company estimates incurring lower operating expenses in 2019, reflecting restructuring expected recurrent savings of about $60 million and one-time restructuring expenditures of $120 million in cash. Moreover, in 2019, the company projects adjusted gross profit margin to improve from approximately 57%, backed by higher revenues, savings from restructuring initiatives, portfolio trimming, and favorable foreign exchange impact.

Execution of cost saving opportunities is likely to bolster bottom-line growth in 2019.

DENTSPLY SIRONA Inc. Price and EPS Surprise

 

DENTSPLY SIRONA Inc. Price and EPS Surprise | DENTSPLY SIRONA Inc. Quote

However, in the first quarter company expects gross margin to be the lowest, primarily owing to the timing of the shipments and restructuring savings.

Further, selling, general and administrative expenses are projected to be higher in the first quarter due to the timing of expenses related to the IDS and investments in new products.

DENTSPLY SIRONA’s significant international presence poses a threat to the company’s to-be-reported. Foreign exchange is estimated to negatively impact 2019 revenues of 2.5% or $100 million, given the current rates for the remainder of the year.

What Our Quantitative Model Suggests

Per the proven Zacks model, a company with a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

DENTSPLY SIRONA has a Zacks Rank #2 and an Earnings ESP of -1.12%, a combination that makes surprise prediction difficult.

Please note that we caution against stocks with a Zacks Rank #4 (Sell) or 5 (Strong Sell) going into the earnings announcement, especially when the company is witnessing negative estimate revisions.

Stocks Worth a Look

Here are some stocks worth considering from the broader medical space as these have the right combination of elements to beat on earnings this time around.

Teleflex Incorporated TFX has an Earnings ESP of +1.65% and a Zacks Rank #3.

Cardinal Health, Inc. CAH has an Earnings ESP of +1.13% and a Zacks Rank #3.

STERIS plc STE has an Earnings ESP of +0.35% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here .

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Teleflex Incorporated (TFX) : Free Stock Analysis Report
 
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