DENTSPLY International Inc. (XRAY) posted a 4.5% rise in adjusted net earnings per share to 69 cents for the second quarter of 2014 from 66 cents for the comparable quarter of 2013. With this, earnings per share surpassed the Zacks Consensus Estimate by a penny.
Adjusted net earnings rose 4.0% to $99.7 million for the quarter from $95.8 million in the second quarter of 2013. Reported earnings were $90 million or 62 cents per share in the quarter compared with $87 million or 60 cents per share in the second quarter of 2013.
Net revenues in the quarter edged up 0.6% to $765.2 million, but fell shy of the Zacks Consensus Estimate of $780 million. The decrease was attributable to sluggish market in both the U.S. and Europe. Excluding precious metals content, net revenues rose 2.1% to $730.9 million.
Margins
Gross profit in the quarter rose 2.3% to $424.5 million from $415.0 million in the prior-year quarter. Gross margin increased 100 basis points (bps) to 55.5% in the quarter from 54.5% a year ago.
Adjusted operating earnings inched up 2.3% to $141.0 million from $137.8 million in the year-ago quarter. Adjusted operating margin expanded 30 bps to 18.4% in the quarter from 18.1% in the year-ago quarter.
Financial Position
XRAY had cash and cash equivalents of $66.9 million as of Jun 30, 2014, down 10.7% from $75.0 million at the end of 2013. Long-term debt decreased 8.6% to $1,065.9 million as of Jun 30, 2014 from $1,166.2 million as of Dec 31, 2013. Consequently, long-term debt-to-capitalization ratio dipped 230 bps to 29.2% from 31.5% as of Dec 31, 2013.
In the first half of the year, cash flow from operations jumped 67.0% to $220.2 million from $131.9 million in the year-ago period. Capital expenditure for the period went up 5.8% to $48.8 million from $46.2 million in the 2013-first half.
Guidance
For 2014, XRAY reaffirmed its adjusted-earnings per share guidance in the range of $2.47 to $2.55, reflecting a 5.1 to 8.5% rise over the prior year. The current Zacks Consensus Estimate of $2.52 lies within the guided range.
Our Take
Although the bottom line beat estimates, we remain unimpressed by XRAY’s flat top line and revenue miss in the second quarter of the year. This is mainly due to ongoing difficult dental market trends both in the U.S. and Europe. However, we note that improving margins represent a potential upside for XRAY.
Currently, XRAY carry a Zacks Rank #4 (Sell). Some better-ranked medical/dental suppliers stocks that warrant a look include Align Technology Inc. (ALGN), Bio-Reference Laboratories Inc. (BRLI), and McKesson Corporation (MCK). All of them carry a Zacks Rank #2 (Buy).
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