Will Sirona Dental Systems (SIRO) Miss Earnings in Q1? - Analyst Blog

Sirona Dental Systems Inc. ( SIRO ) is slated to report first-quarter fiscal 2015 results before the opening bell on Feb 6. In the last reported quarter, this dental technology company missed the Zacks Consensus Estimate by a penny, recording a negative earnings surprise of 1.1%. However, the average earnings surprise over the past four quarters stands at +1.93%.

Let's see how things are shaping up for this announcement.

Factors to Consider

Long Island City, NY-based Sirona Dental Systems has been witnessing an increased adoption of its dental technology, including the CAD/CAM and CEREC offerings as well as high-end handpieces and hygiene products.

In fiscal 2015, the company plans on introducing several innovative products, including the new CEREC Ortho software, which are expected to drive significant growth going forward. Moreover, we believe that the company's extended relationship with Henry Schein ( HSIC ) in France and the distribution partnership with Patterson Companies ( PDCO ) in the U.S. will strengthen its network and open up new avenues for growth.

However, Sirona Dental Systems has significant exposure to foreign currencies, particularly the Euro. With 43% of its fiscal 2014 revenues denominated in Euros, the recent weakening of the Euro against the U.S. dollar will negatively impact the company's top line. Moreover, the U.S. market seems to be a drag at the moment with competition intensifying in the CAD/CAM market.

Furthermore, as the company continues to make planned investments in its sales and product management infrastructure, we believe this will hurt the bottom line in the near term. Notably, the expected earnings growth rate for fiscal 2015 is pegged at 9.4%, which is significantly lower than the industry average of 23.7%.

Earnings Whispers

Our proven model does not conclusively show that Sirona Dental Systems is likely to beat earnings this quarter as it does not have the right combination of two key ingredients. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP: Sirona Dental Systems has an ESP of -3.19%. That is because the Most Accurate estimate stands at 91 cents a share, which is lower than the Zacks Consensus Estimate of 94 cents.

Zacks Rank: Sirona Dental Systems carries a Zacks Rank #3 (Buy). Though a Zacks Rank #3 increases the predictive power of ESP, a -3.19% ESP makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

A Stock to Consider

Here is a company you may want to consider as our model shows that this has the right combination of elements to post an earnings beat:

Healthsouth Corp. ( HLS ) with an Earnings ESP of +3.92% and a Zacks Rank #2 (Buy).

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

HENRY SCHEIN IN (HSIC): Free Stock Analysis Report

PATTERSON COS (PDCO): Free Stock Analysis Report

HEALTHSOUTH CP (HLS): Free Stock Analysis Report

SIRONA DENTAL (SIRO): Free Stock Analysis Report

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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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