A major player in the malocclusion market,
) shares rushed more than 5% to close at $45.93 yesterday,
following the release of its preliminary third-quarter 2013
The results surpassed the Zacks Consensus Estimate on both
fronts. Along with revenues, earnings per share (EPS) remained
above the guidance range. This has led the company to provide a
strong fourth-quarter guidance, which further boosted investors'
Result in Details
reported its third-quarter 2013 earnings per share of 42 cents, a
significant increase from the year-ago break-even level. We note
that the quarter's net earnings figure includes certain one-time
tax benefits related to the fiscal 2012 U.S. federal income
taxes, while the year-ago net loss included certain pre-tax
charges related to goodwill impairment and acquisition and
However after adjusting for these one-time items, the adjusted
EPS during the reported quarter came in at 40 cents, reflecting a
stupendous 42.8% increase on a year-over-year basis.The earnings
result was also way ahead of the company's guidance range of
Net revenues surged 20.5% year over year to $164.5 million in
the reported quarter, surpassing the Zacks Consensus Estimate of
$159 million. It also exceeded the previously guided range of
$154.9−$160.0 million issued by the company.
Total Invisalign Clear Aligner revenues were up 21.2% year
over year to $153.3 million. The revenues were primarily driven
by increased Invisalign shipments and higher ASPs. For the
quarter, total Invisalign case shipments were 106,900, up 15.5%
year over year, propelled by continued expansion of the company's
customer base and increased Invisalign utilization. Revenues from
Scanner and CAD/CAM services were down 12.2% year over year to
The company recorded 34.2% of the total Invisalign Clear
Aligner sales from North America orthodontists (up 21.8% year
over year to $52.5 million), 33.5% from North American GP
Dentists (up 10.6% to $51.4 million), 25.4% from the
international market (up 31.1% to $38.9 million) and 6.9% from
non-case revenues (up 43.2% to $10.8 million).
Gross margin expanded by about 250 basis points (bps) year
over year to 76.0% in the third quarter. During the quarter,
Invisalign gross margins were up 230 bps reflecting higher
average selling prices (ASPs), resulting from price increase,and
from change in the company's mid-course correction policy. Gross
margin for Scanner and CAD/CAM services increased 160 bps to
22.2% as a result of lower manufacturing costs, which were
partially offset by lower ASPs.
The company witnessed a 24.1% increase in sales and marketing
expenses to $45.2 million; 11.0% rise in general and
administrative expenses to $27.5 million, and a 9.7% increase in
research and development expenses to $10.9 million. Operating
margin during the quarter expanded a remarkable 384 bps to
Align exited the quarter with $400.4 million in cash and cash
equivalents compared with $356.4 million at the end of fiscal
For the fourth quarter of 2013, the company expects revenues
in the range of $169.1−$173.1 million. The current Zacks
Consensus Estimate of $165 million remains far below the guided
range. Earnings per share are expected in the range of 41-43
cents compared with the Zacks Consensus Estimate of 36 cents.
Shipments for the Invisalign clear aligner are expected to
increase to an encouraging range of 21.2% to 23.9% on a
year-over-year basis to 109,700-112,100.
Align exited third-quarter 2013 on a positive note. The
company's revenues and earnings continue to increase, surpassing
the previous guidance.
We are also encouraged by the company's initiative to
reconvert six indirect country markets in Australia, New Zealand,
Hong Kong, Singapore, Macau and Malaysia to direct
Invisalign sales regions. Align has already started realizing
direct sales at its full Invisalign ASP, rather than the
discounted ASP finalized under the distribution agreement.
The stock currently carries a Zacks Rank #2 (Buy). Other
medical stocks such as
Cardinal Health, Inc.
Bio-Rad Laboratories, Inc.
) carry a Zacks Rank #1 and warrant a look.
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