In a bid to strengthen its CAD-CAM-based dental unit, DENTSPLY SIRONA Inc. XRAY, recently announced a definitive agreement to acquire OraMetrix — a leading industry provider of innovative 3-D technology solutions.The company also offers an advanced, CAD platform developed for dental professionals to deliver consistently predictable orthodontic outcomes.
The transaction is expected to be completed by the second quarter of 2018.
What is CAD-CAM?
DENTSPLY’s CAD/CAM is a dental imaging platform and a major foundation in global dental markets.
CAD/CAM is a field of dental supplies and prosthodontics using computer-aided design and computer-aided manufacturing technologies.
In fact, the dental supplies market looks promising at the moment. Over the last 10 years, the market has gained 119.8% compared with the S&P 500 Index’s rally of 101.4%.
DENTSPLY SIRONA Inc. Price and Consensus
Deal in Detail
Financial terms of the deal have been kept under wraps by DENTSPLY.
Post the acquisition, the company will be able to provide an end-to-end digital workflow to dental professionals and address the increasing demands for aesthetics. The acquisition of OraMetrix is likely to strengthen DENTSPLY’s footprint in the global dental industry.
Notably, the company announced its plans to broaden OraMetrix’ technologies and services post the buyout. For this, DENTSPLY is likely to incur additional investments and expenses which will be dilutive to overall earnings per share in 2018 and 2019. Meanwhile, OraMetrix posted revenues of approximately $20 million in 2017.
The acquisition is likely to bolster the company’s Technologies & Equipment segment. This segment consists of dental implants, CAD/CAM systems, imaging systems, treatment centers and orthodontic products. In the fourth quarter of 2017, sales improved 10.4% to $630.2 million in the segment and 5.8% at cc.
In fact, the acquisition will introduce a comprehensive orthodontic offering that will include a ‘full arch clear-aligner’ solution for DENTSPLY.
Conclusion
DENTSPLY has been one of the underperforming companies in the MedTech space. Lackluster margin trends, declining earnings and foreign exchange headwinds have been plaguing the company. However, per a research report by Technavio, the global dental CAD/CAM market will witness a CAGR of more than 8% by 2021. We believe that DENTSPLY is striving to overcome these problems with such deals.
The company’s price performance has been dull as well. DENTSPLY’s shares have lost 15.2% compared with the industry’s decline of 0.3% in a year’s time. Interestingly, an uptick in its share price was witnessed post the announcement of OraMetrix’s buyout. Notably, shares of DENTSPLY have inched up 0.8% to close at $51.10 following the press release.
Further, the company’s agreements with MedTech bigwigs like Patterson Companies in Canada are likely to drive sales. Recently, DENTSPLY witnessed a rebound in sales in Asia, particularly Japan, and strong growth in Russia.
Zacks Rank & Key Picks
DENTSPLY has a Zacks Rank #4 (Sell).
A few better-ranked stocks in the broader medical sector are Bio-Rad Laboratories BIO, athenahealth, Inc. ATHN and PerkinElmer PKI.
Bio-Rad Laboratories sports a Zacks Rank of #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. The company has a long-term expected earnings growth rate of 20%.
athenahealth is a Zacks #1 Ranked player. The company has a long-term expected earnings growth rate of 21.5%.
PerkinElmer has a long-term expected earnings growth rate of 12.3%. The stock carries a Zacks Rank #2 (Buy).
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