U.S. Markets closed

Will R&D Focus Fuel DENTSPLY SIRONA's (XRAY) Earnings in Q4?

Zacks Equity Research

DENTSPLY SIRONA Inc.’s XRAY fourth-quarter 2018 results are expected to be released very soon. The company’s focus on Research and Development (R&D) is expected to boost quarterly results.

Let’s take a look at other major factors that will influence DENTSPLY SIRONA’s performance in the quarter to be reported.

Q3 Results at a Glance

In the last reported quarter, the company reported adjusted earnings per share (EPS) of 38 cents, which fell short of the Zacks Consensus Estimate by 15.6%. The bottom line also deteriorated significantly by 45.7% year over year. Net revenues declined 8% to $928.4 million and missed the Zacks Consensus Estimate of $952.8 million. At constant currency (cc), the metric declined 5.9%.

Let’s delve deeper.

Which Way are Q4 Estimates Trending?

The Zacks Consensus Estimate for fourth-quarter earnings is pegged at 54 cents, reflecting a decline of 34.2% year over year. The same for net revenues stands at $1.02 billion, mirroring a 6.9% decline year over year.

Factors to Drive Q4

DENTSPLY SIRONA’s overall growth strategy depends on product innovation and R&D focus, which is likely to drive sales in the fourth quarter. This apart, a solid track record of innovation and a dedicated, passionate workforce might aid top-line growth.

In Europe, products like WaveOne GOLD, X-Smart iQ, VDW and CONNECT Drive are expected to provide a boost to revenues. However, on an internal basis, the metric declined 8.4% in Europe during the third quarter. Sluggishness in DENTSPLY SIRONA’s Venlo unit and some softness across the equipment markets in Central Europe led to the downturn. Management expects normalized growth in the European equipment market during the fourth quarter.

Solid preventive and restorative product portfolio is also expected to drive fourth-quarter revenues. Markedly, DENTSPLY SIRONA’s diverse product portfolio and recurring revenue base are the key catalysts. Meanwhile, the company’s laser team is spending considerable time on innovation. This, in turn, is likely to boost the company’s shares and margins.

In the quarter to be reported, management at DENTSPLY SIRONA also plans approximately $40-$45 million of destocking. For 2018, the company anticipates adjusted EPS at or slightly below the low end of the previously guided range of $2.00-$2.15 per share. The 2018 revenue guidance assumes a decline of 2% at cc.

In the first half of 2018, DENTSPLY SIRONA confirmed that it has taken steps to reduce its interest expenses by the fourth quarter. Notably, the company plans to cut costs by approximately $20 million.

Overall, it has a very low-cost debt structure and an ample opportunity to strengthen its businesses and make acquisitions.

Earnings Whispers

Our quantitative model clearly shows that a stock needs to have both — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — to deliver a positive earnings surprise. This is not the case here as you will see below.

Earnings ESP: DENTSPLY SIRONA has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: DENTSPLY SIRONA carries a Zacks Rank #3.

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

Stocks Worth a Look

Here are a few medical stocks worth considering as they have the right combination of elements to post an earnings beat this quarter.

The Cooper Companies, Inc. COO has an Earnings ESP of +0.76% and a Zacks Rank #3.

Adamas Pharmaceuticals, Inc. ADMS has an Earnings ESP of +10.29% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

TG Therapeutics, Inc. TGTX has an Earnings ESP of +0.55% and a Zacks Rank #2.

Breakout Biotech Stocks with Triple-Digit Profit Potential

The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.

Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +98%, +119% and +164% in as little as 1 month. The stocks in this report could perform even better.