Align Technology (ALGN) to Post Q3 Earnings: What's in Store?

Align Technology, Inc. ALGN is set to report third-quarter 2020 results on Oct 21, after the closing bell.

In the last-reported quarter, the company reported an adjusted loss per share of 35 cents, which was wider than the Zacks Consensus Estimate of a loss of a penny. Over the trailing four quarters, its earnings outperformed the Zacks Consensus Estimate on two occasions and missed in the other two, the four-quarter average beat being -852.36%.

Let’s take a look at how things have shaped up prior to this announcement.

Factors at Play

Invisalign System

Align Technology, during its second-quarter earnings call in July, confirmed the increasing adoption of virtual tools by the providers of the Invisalign system over the past few months. This has helped minimize in-office appointments and deliver doctor-directed and personalized treatment that is trustworthy, safe and convenient. The growing adoption of digital treatment is likely to have continued in the third quarter as well, minimizing the dent in sales of the Invisalign system, thus boosting the top line.

Also, the gradual reopening of dental practices across the globe is likely to have positively impacted the company’s third-quarter performance. This is likely to have boosted the shipments of Invisalign cases.

Align Technology, Inc. Price and EPS Surprise

Align Technology, Inc. Price and EPS Surprise

Align Technology, Inc. price-eps-surprise | Align Technology, Inc. Quote

Clear Aligner shipments were dismal during the second quarter due to the adverse impacts of the pandemic-led business disruptions. However, the gradual recovery in business witnessed by the company buoys optimism about the third-quarter results. Growth in shipment volumes is expected on strong adoption of non-comprehensive products, thanks to Invisalign Go systems and Invisalign Moderate.

Over the past few months, the company registered lower doctor activity due to practice closures in the American markets, particularly in the general practitioner dentist channels. However, given the recovery timing in the Americas, the United States continues to lead, followed by Canada and then Latin America, corresponding to the timing of pandemic-related shutdowns and re-openings in each region. This is likely to have continued during the third quarter as well, boosting the top line.

Align Technology’s expansion of its digital platform with cloud-based ClinCheck Pro 6.0 and ClinCheck “In-Face” Visualization tool for Invisalign treatment looks promising and is expected to have boosted the top line. Other notable offerings include Invisalign Virtual Appointment and Invisalign Virtual Care, contributing to the company’s virtual solutions.

The availability of Steraligner aligner cleaning system on the Invisalign Doctor Site web store and and Invisalign Stickables (innovative sticker accessories designed exclusively for use with the SmartTrack material in Invisalign clear aligners) are expected to have boosted the company’s sales during the third quarter.

Additionally, a multi-year partnership with the New Orleans Saints and an agreement with the National Football League (NFL) to make the Invisalign brand the Official Clear Aligner Sponsor of the NFL, buoy optimism.

Internationally, in the EMEA region, the company continued to witness momentum with Invisalign First for Invisalign treatment in young patients, which is likely to have continued in the to-be-reported quarter as well. Further, during the second quarter, the company confirmed that APAC recorded positive growth in teen shipments, led by China, reflecting a strong uptick of recovery programs. Also, Japan, Taiwan and South Korea successfully managed recovery efforts and delivered better-than-expected results. This trend is likely to have continued during the third quarter as well.

Imaging Systems & CAD/CAM Services Business

The buyout of exocad Global Holdings GmbH (exocad) in April is also likely to have boosted Align Technology’s top line during the third quarter. Notably, the company renamed its Scanner and Service business as the Imaging Systems & CAD/CAM (computer-aided design/computer-aided manufacturing) Services business post the exocad buyout.

The continued momentum of Element 5D Imaging Systems in North America and APAC, along with sales of iTero Element 1 scanner model in China and robust sales of the Flex scanner model in EMEA, which were observed during the second quarter, are likely to have continued in the third quarter.

The Estimate Picture

The Zacks Consensus Estimate for third-quarter 2020 revenues is pegged at $504.6 million, indicating a decline of 16.9% from the year-ago figure. The same for the bottom line is pinned at an earnings of 43 cents per share, suggesting a plunge of 66.4%.

What Our Model Suggests

Per our proven model, a stock with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) along with a positive Earnings ESP has good chances of beating estimates. This is the case here as you can see:

Zacks Rank: The company currently carries a Zacks Rank #3.

Earnings ESP: Align Technology has an Earnings ESP of +19.72%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Other Stocks Worth a Look

Here are a few other medical stocks worth considering as these too have the right combination of elements to beat on earnings this reporting cycle.

Abbott Laboratories ABT has an Earnings ESP of +5.30% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Cardinal Health, Inc. CAH has an Earnings ESP of +1.70% and a Zacks Rank of 2 at present.

IDEXX Laboratories, Inc. IDXX has an Earnings ESP of +1.42% and is a Zacks #2 Ranked stock.

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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.

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