Shares of DENTSPLY International Inc. XRAY rallied to a new 52-week high of $62.79 on Dec 3 and closed a tad bit lower at $62.61. This represents a strong year-to-date return of approximately 17.5%, much better than the S&P 500’s return of -0.5% over the same period.
The recent expiration of the waiting period under the Hart-Scott-Rodino (HSR) Antitrust Improvements Act of 1976 related to DENTSPLY’s pending acquisition of Sirona Dental SIRO is primarily responsible for the bullish trend.
Currently, DENTSPLY has a Zacks Rank #2 (Buy). The stock has a market cap of $8.73 billion and a long-term expected earnings growth rate of 9.8%.
Growth Catalysts
This September, DENTSPLY announced plans to take over Sirona in an all-stock deal, worth nearly $5.5 billion. The merged entity, to be known as DENTSPLY SIRONA, is expected to have a pro forma equity value of about $13.3 billion (based on closing prices of the companies as of Sep 14, 2015).
DENTSPLY SIRONA will be one of the leading global manufacturers of professional dental products and materials. It will offer a range of complementary products for dental offices – from fluoride rinses to dental chairs.
The merged entity also plans to buy back shares worth $500 million after the completion of the deal. In addition, the new company expects to continue paying DENTSPLY's current dividend of 29 cents per share. This is expected to entice investors, going forward.
The new entity is also likely to achieve significant cost and revenue synergies on the back of an expanded product portfolio, a bigger customer base and better infrastructure. In fact, the merger is expected to deliver annual pre-tax synergies of more than $125 million by the third year of closing the deal.
DENTSPLY and Sirona now expect the transaction to be completed in the first quarter of 2016, provided other customary closing conditions are fulfilled.
Estimate Revisions
The Zacks Consensus Estimate for fiscal 2015 remained steady at $2.61 over the last 30 days. Fiscal 2016 estimates also remained steady at $2.80 over the same period.
Key Picks
Better-ranked stocks include Masimo Corp MASI and Natus Medical BABY. Both the stocks sport a Zacks Rank #1 (Strong Buy).
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