Envista (NVST) Q1 Earnings Miss Estimates, Margins Down
Envista Holdings Corporation NVST reported first-quarter 2023 adjusted earnings per share (EPS) of 38 cents, down 19.1% year over year. The bottom line also missed the Zacks Consensus Estimate by 7.3%.
The adjustments include charges and benefits related to the amortization of acquired intangible assets, certain asset impairment charges and asset impairments, among others.
The company’s earnings from continuing operations were 25 cents in the quarter compared with the year-ago quarter’s 39 cents, reflecting a 35.9% plunge.
Revenues in Detail
Revenues totaled $627.2 million in the reported quarter, down 0.7% year over year. The metric missed the Zacks Consensus Estimate by 0.6%.
The year-over-year decline in core sales was primarily the result of weakness in China and Russia and lower demand for the company’s large capital equipment.
Segments in Detail
Envista operates through two segments — Speciality Products & Technologies and Equipment & Consumables.
In the first quarter, Speciality Products & Technologies totaled $410 million, up 3.2%. Within Speciality Products & Technologies, the company’s combined Orthodontics business increased more than 12% with Spark Aligner business continuing to expand rapidly.
Revenues in the Equipment & Consumables segment declined 7.3% year over year to $217.2 million in the quarter under review. The downside was due to continued slowdown in equipment volumes as well as a modest decline in the consumable sales.
Operational Update
Gross profit for the reported quarter fell 3.0% year over year to $362.7 million. Gross margin contracted 142 basis points (bps) to 57.8%.
Selling, general and administrative expenses were up 3.1% year over year to $266.1 million. Research and development expenses rose 0.4% year over year to $24.5 million.
Envista Holdings Corporation Price, Consensus and EPS Surprise
Envista Holdings Corporation price-consensus-eps-surprise-chart | Envista Holdings Corporation Quote
Operating profit of $72.1 million were down 21.2% year over year. Operating margin, too, contracted 300 bps to 11.5%.
Financial Update
Envista ended first-quarter 2023 with cash and cash equivalents of $585.2 million compared with $606.9 million at the end of fourth-quarter 2022. Total long-term debt was $873.8 million at the end of the first quarter compared with $879.7 million at the end of the fourth quarter of 2022.
Net cash provided by operating activities at the end of the first quarter was $3.1 million compared with $3.5 million a year ago.
Our Take
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 and lower demand for the large capital equipment. Geographically, the company’s sales declined substantially in Russia and China. The decline 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. The contraction of both margins are discouraging too.
On a positive side, the company registered strong growth in the Specialty Products & Technologies Segment driven by combined Orthodontics business and Spark Aligner business. The company registered double-digit growth in other emerging markets and high single-digit growth in Europe.
Zacks Rank and Key Picks
Envista currently carries Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader medical space that have announced quarterly results are Edwards Lifesciences Corporation EW, Intuitive Surgical, Inc. ISRG and Johnson & Johnson JNJ.
Edwards Lifesciences, carrying a Zacks Rank #2 (Buy), reported first-quarter 2023 adjusted earnings per share (EPS) of 62 cents, beating the Zacks Consensus Estimate by 1.6%. Revenues of $1.46 billion outpaced the consensus mark by 4.7%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Edwards Lifesciences has a long-term estimated growth rate of 6.8%. EW’s earnings surpassed estimates in two of the trailing four quarters, missed the same in one and broke even in the other, the average being 1.2%.
Intuitive Surgical, having a Zacks Rank #2, reported first-quarter 2023 adjusted EPS of $1.23, which beat the Zacks Consensus Estimate by 3.4%. Revenues of $1.70 billion outpaced the consensus mark by 6.9%.
Intuitive Surgical has a long-term estimated growth rate of 13%. ISRG’s earnings surpassed estimates in two of the trailing four quarters and missed the same in the other two, the average being 1.9%.
Johnson & Johnson reported first-quarter 2023 adjusted earnings of $2.68 per share, beating the Zacks Consensus Estimate by 6.8%. Revenues of $24.75 billion surpassed the Zacks Consensus Estimate by 5%. It currently carries a Zacks Rank #2.
Johnson & Johnson has a long-term estimated growth rate of 5.5%. JNJ’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 3.9%.
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