DENTSPLY SIRONA Inc. XRAY is well poised for growth on the back of strong focus on Research and Development (R&D) and product portfolio. However, weakness in its Consumables segment remains a concern.
The stock has lost 15.2%, compared with the industry’s decline of 2.7% in a year’s time. Meanwhile, the S&P 500 Index rallied 19.9% in the same time frame.
The company — with a market capitalization of $9.55 billion — is a global leader in the design, development, manufacture and marketing of dental consumables, dental laboratory products, dental specialty products and consumable medical device products. It anticipates earnings to improve 7.9% over the next five years.
Let’s take a closer look at the factors that substantiate the company’s Zacks Rank #3 (Hold).
What’s Deterring the Stock?
Sluggishness in DENTSPLY’s Consumables business remains a concern.
In second-quarter 2020, DENTSPLY’s Consumables sales declined 58.6% year over year to $186.7 million. On an internal basis, sales fell 57.7%. Per management, decline in organic sales stemmed from lower demand across all three regions due to lower visits by dentists and customers and procedures on account of the COVID-19 pandemic. Lower sales of Endodontic, Restorative and Preventive products primarily led to the downside.
What’s Favoring the Stock?
DENTSPLY’s overall growth strategy rests on product innovation. The company’s solid internal growth, despite challenging macroeconomic headwinds, is primarily driven by its innovative new products. The company pursues several research and development (R&D) initiatives to support technological development.
It is encouraging to note that the company is successfully reinforcing its foothold in the highly competitive MedTech space with high-end products like PrimeScan, GP Ortho software and many more. Apart from this, new products like WaveOne GOLD, X-Smart iQ, VDW and CONNECT Drive are also expected to drive the company’s penetration in Europe.
Further, the company’s diversified product portfolio and recurring revenue base are key growth catalysts in the long run.
In recent times, DENTSPLY launched PrimeScan, a digital impression scanner. Per management, it has been driving the company’s top line significantly. Additionally, in January, DENTSPLY launched Primemill. Additionally, per the second-quarter 2020earnings call management announced two portfolio shaping activities that will consolidate its manufacturing footprint, boost productivity and lower fixed costs.
Which Way are Estimates Headed?
For 2020, the Zacks Consensus Estimate for revenues is pegged at $3.18 billion, indicating a decline of 21% from the prior-year quarter. The same for adjusted earnings per share stands at $1.14, suggesting a plunge of 53.5% from the year-ago reported figure.
Stocks to Consider
Some better-ranked stocks from the broader medical space include West Pharmaceutical Services, Inc. WST, Thermo Fisher Scientific Inc. TMO and PerkinElmer, Inc. PKI. While both PerkinElmer and West Pharmaceuticals sport a Zacks Rank of 1 (Strong Buy), Thermo Fisher carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
PerkinElmer has a projected long-term earnings growth rate of 17.4%.
West Pharmaceutical has a projected long-term earnings growth rate of 17.4%.
Thermo Fisher has an estimated long-term earnings growth rate of 15%.
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