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Align Technology, Inc. ALGN has been gaining from its solid performance in the second quarter of 2021. Continued adoption of its digital platform is expected to drive its rally further. The raised full-year 2021 outlook buoys optimism. Yet, stiff competition and foreign exchange headwinds remain concerns.
Over the past year, shares of this Zacks Rank #2 (Buy) company have outperformed the industry. The company has surged 130% compared with 36.5% growth of the industry and 36.6% rise of the S&P 500.
The renowned medical device provider specializes in clear aligner therapy, intra-oral scanners, and CAD/CAM (computer-aided design/computer-aided manufacturing) digital services used in dentistry, orthodontics and dental record storage. It has a market capitalization of $56.12 billion. The company projects 26.6% growth for the next five years and expects to maintain its strong segmental performance. Further, the company surpassed estimates in the trailing four quarters, the average surprise being 87.27%.
Let’s delve deeper.
Impressive Q2 Results: Align Technology exited the second quarter of 2021, with better-than-expected results despite the challenging business environment. The company reported solid revenue growth in the quarter under review, reflecting continued momentum in both Clear Aligners and Systems and Services. Continued adoption of the company’s digital platform has also been a tailwind. The company is witnessing strong global growth in iTero business across all regions, with continued adoption of the iTero Element 5D Plus Series of next-generation scanners and imaging systems. Robust gross margin expansion and year-over-year improvement in operating income are encouraging.
International Focus to Drive Growth: Align Technology has undertaken several strategies to drive adoption of Invisalign Technology that includes product/technology development, extending clinical effectiveness, extension of the Invisalign Technology brand along with boosting international growth.
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For the international business, Invisalign shipments rose 12.7% and 149%, on a sequential and year-over-year basis, respectively. In EMEA, Invisalign case volumes were up 17% sequentially and 265% year over year, with strong broad-based growth across all markets. Further, Align Technology registered 76.2% year-over-year growth in digital scans used for Invisalign case submissions for its international business. For the Americas, the same was up 86.6% from the year-ago number.
Raised Guidance: Align Technology, on the back of its impressive performance, has raised its financial outlook for 2021.
The company now expects revenues for the year in the range of $3.85 billion to $3.95 billion, suggesting a rise of 56-60% from 2020. The previous guided range was $3.7-$3.9 billion. The company expects revenue growth in the second half of 2021 to exceed the mid-point of its long-term operating model target of 20% to 30%.
However, Align Technology faces stiff competition from traditional orthodontic appliance (or wires and brackets) players such as 3M’s Unitek, Danaher Corporation’s Sybron Dental Specialties and Dentsply International.
Furthermore, the substantial challenges arising from unfavorable foreign currency translation have been affecting Align Technology’s financials over the past few quarters.
Align Technology is witnessing a positive estimate revision trend for the current year. Over the past 60 days, the Zacks Consensus Estimate for its earnings has moved 5.5% north to $10.99.
The Zacks Consensus Estimate for the company’s third-quarter fiscal 2021 revenues is pegged at $962.3 million, suggesting a 31.1% rise from the year-ago reported number.
Other Key Picks
A few similar-ranked stocks from the broader medical space are Envista Holdings Corporation NVST, BellRing Brands, Inc. BRBR and Biolase, Inc. BIOL, each carrying a Zacks Rank #2. You can see the complete list of Zacks #1 Rank (Strong Buy) stocks here.
Envista Holdings has an estimated long-term earnings growth rate of 27%.
BellRing Brands has an estimated long-term earnings growth rate of 29%.
Biolase has a projected long-term earnings growth rate of 15%.
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