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Align Technology (ALGN) Q4 Earnings and Revenues in Line

Adjusting for 8 cents of foreign currency translation related impact, Align Technology Inc.ALGN reported adjusted earnings of 67 cents per share in the fourth quarter of 2016, up 11.6% from 60 cents in the year-ago quarter. Earnings were at the upper end of the company's guided range of 64−67 cents. Meanwhile, the figure was in line with the Zacks Consensus Estimate.

However, full-year 2016 earnings came in at $2.33, lagging the Zacks Consensus Estimate by 3.3%.

Per management, fourth-quarter earnings were impacted by a stronger U.S. dollar, mainly due to the net realized foreign exchange losses related to the revaluation of certain balance sheet accounts addressing unrealized foreign exchange losses included in other income and expense.

Align Technology, Inc. Price, Consensus and EPS Surprise

Align Technology, Inc. Price, Consensus and EPS Surprise | Align Technology, Inc. Quote

Revenues

Revenues grew 27.3% year over year to $293.2 million in the quarter, in line with the Zacks Consensus Estimate. The top line also met the upper end of the company's expectation of $289.2-$293.9 million.

Full-year 2016 revenues came in at $1.1 billion, up 27.7% year over year and above the Zacks Consensus Estimate of $1.08 billion.

Per management, strong top-line growth resulted from better-than-expected Invisalign and iTero volumes, primarily in North America, offset by lower ASPs, discounts and FX.

Segments in Detail

Revenues at the Clear Aligner segment (85.7% of total revenue) increased 17.5% year over year to $251.5 million in the reported quarter, primarily driven by continued strong Invisalign case volume growth across all customer channels and geographies.

In the fourth quarter, Invisalign case shipments amounted to 190,000, up 18.5% year over year, aided by growth across all regions. During the quarter, Align added 2,615 Invisalign doctors worldwide, out of which 1,420 were from North America while 2280 were from international regions.

Revenues from Scanner and Service (14.3%) improved a massive 156.8% to $41.7 million.

Margins

Gross margin in the fourth quarter was up 7 basis points (bps) year over year to 75.1% on a 26.9% rise in cost of net revenue.

During the quarter, Align witnessed a 30.8% year-over-year increase in selling, general and administrative expenses to $130.2 million and a 55.5% hike in research and development (R&D) expenses to $21.6 million. The operating margin, however, contracted 245 bps to 23.3% due to higher operating expenses.

Financial Details

Align exited 2016 with cash and cash equivalents and short-term marketable securities of $640.2 million, up from $527.2 million at the end of 2015.

In the reported quarter, Align repurchased approximately 0.4 million shares for $38 million under the Apr 2014 program. Subsequent to the year end, the company completed this buy-back plan by purchasing the remaining $3.8 million. Management has $300 million available for repurchase under the 2016 repurchase plan which was announced last April.

Guidance

For the first quarter of 2017, the company projects EPS of 64−67 cents on revenues of $295-$298 million. The current Zacks Consensus Estimate for EPS and revenues is pegged at 63 cents and $293.1 million, respectively.

The company also expects Invisalign case shipments in the band of 200,000 to 203,000, up approximately 22%-24% over the same period a year ago.

Our Take

Align Technology ended the fourth quarter with both earnings and revenues meeting the Zacks Consensus Estimate. We are also upbeat about the continued strong Invisalign volumes, which in turn drove the top line.

Additionally, the company has a strong cash balance that enables it to adopt attractive share repurchase programs and in turn provide solid returns to investors. Going forward, management anticipates consistent growth in the Asia-Pacific region.

Zacks Rank & Key Picks

Align Technology currently has a Zacks Rank #3 (Hold). Better-ranked medical stocks are Glaukos Corporation GKOS , Cardiovascular Systems CSII and Neogen Corp. NEOG . Glaukos sports a Zacks Rank #1 (Strong Buy) while Cardiovascular Systems and Neogen carrya Zacks Rank #2 Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

Glaukos gained over 100% in the last one year in comparison to the S&P 500's gain of only 19.7%. The company has a stellar four-quarter average earnings surprise of over 100%.

Cardiovascular Systems surged over 100% in the last one year in comparison to the S&P 500. It has a four-quarter average earnings surprise of 67.8%.

Neogen gained 26.0% in the past one year, better than the S&P 500 mark. The stock has an impressive long-term earnings growth of 16.7% for the next five years compared to the industry average of 15.2%.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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