Envista (NVST) Gains From New Acquisitions Amid FX Woes
Envista NVST is gaining traction in the emerging markets with strong global expansion. Also, strategic acquisitions poise the company for future growth. Yet, unfavorable currency movement and weak solvency are major dampeners for the stock. The stock carries a Zacks Rank #3 (Hold).
Envista has outperformed the industry in the past year. The stock has declined 10.6% compared with the industry’s 22.8% fall.
In first-quarter 2023, Envista registered strong growth in the Specialty Products & Technologies Segment, driven by the combined Orthodontics business and Spark Aligner business. The company registered double-digit growth in other emerging markets and high single-digit growth in Europe. The Orthodontic business continued to perform well, delivering double-digit core growth despite the challenges in China and Russia. On a geographic basis, developed markets grew 3.5%, driven by strong growth in Western Europe.
In Q1, the company’s implant businesses in Europe performed well on the back of disciplined commercial execution. The company’s regenerative business, including the newly-acquired Osteogenics business, continues to accelerate as well.
In 2022, Envista closed two strategically significant acquisitions that positioned it to drive the digitization of the dental market while exposing it to higher growth segments within the industry.
In July 2022, Envista acquired Osteogenics Biomedical — the developer of innovative regenerative solutions for periodontists, oral & maxillofacial surgeons and clinicians involved in implant dentistry throughout the world.
In April 2022, Envista acquired Carestream Dental's Intraoral Scanner business. The business is rebranded as DEXIS and will operate as part of the Envista Equipment and Consumables Segment. This acquisition further enables the company’s purpose of partnering with dental professionals to improve patients' lives by digitizing, personalizing and democratizing dental care.
Envista Holdings Corporation Price
Envista Holdings Corporation price | Envista Holdings Corporation Quote
During the first quarter earnings update, the company stated that the recently-acquired business DEXIS IOS and Osteogenics continued to perform in line with the company’s expectations, delivering combined sales of greater than $20 million in the reported quarter. The businesses are expected to contribute over 75 basis points of core growth to Envista in 2023.
On the flip side, Envista ended first-quarter 2023 with lower-than-expected revenues and earnings. The year-over-year decline in core sales was primarily the result of weakness in China and Russia as well as lower demand for large capital equipment.
Geographically, the company’s sales declined substantially in Russia and China. The downside in Russia was primarily due to unusually strong performance in the first quarter of 2022 as clinicians pre-purchased inventory at the start of the conflict in Ukraine. In China, demand was down significantly in the quarter due to COVID-related slowdown. Contraction of both margins is discouraging too.
Gross profit for the reported quarter fell 3% year over year while gross margin contracted 142 basis points (bps) to 57.8%. Selling, general and administrative expenses were up 3.1% year over year. Research and development expenses rose 0.4% year over year. Meanwhile, operating profit was down 21.2% year over year. Operating margin, too, contracted 300 bps to 11.5%.
Key Picks
Some better-ranked stocks in the broader medical space are Zimmer Biomet ZBH, Penumbra PEN and Hologic, Inc. HOLX.
Zimmer Biomet has an earnings yield of 5.17% compared to the industry’s (1.42%). Zimmer Biomet’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 7.38%. Its shares have gained 32.7% against the industry’s 23.1% decline over the past year.
ZBH sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Penumbra, sporting a Zacks Rank #1 at present, has an estimated growth rate of 64.1% for 2024. Penumbra shares have gained 152% compared with the industry’s 9.2% rise over the past year.
PEN’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 109.4%.
Hologic, carrying a Zacks Rank #2 (Buy) at present, has an earnings yield of 4.78% compared to the industry’s (7.07%). Shares of HOLX have gained 14% compared with the industry’s 9.2% growth over the past year.
Hologic’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 27.3%.
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