On Dec 28, Zacks Investment Research downgraded Align Technology Inc. (ALGN) to a Zacks Rank #2 (Buy) from Zacks Rank #1 (Strong Buy).
Why the Downgrade?
On Oct 17, Align Technology had reported third-quarter 2013 adjusted earnings of 40 cents per share, registering a steep rise of 42.8% year over year. The results also surpassed the Zacks Consensus Estimate by 33.3%. The company delivered a strong top line as well, beating the revenue estimates.
Though Align Technology delivered impressive growth during the quarter, persisting global challenges remain an area of concern. Moreover, we believe the large competitive landscape might compel the company to lower prices of some of its products going forward. This can potentially impact growth prospects for the company in the near term.
Furthermore, the general slowdown in the US economy can tamper the future revenue figures. Patients will tend to defer dental procedures, while dentists too will likely play spoilsport delaying capital investments on intra-oral scanners.
Amidst such challenging circumstances, Align Technology expects revenues in the range of $169.1−$173.1 million in the ongoing fourth quarter of 2013, while in the year ago quarter it registered revenues worth $143 million. The current Zacks Consensus Estimate of $173 million remains at the upper end of the guided range. Earnings per share are expected in the range of 41–43 cents compared with the Zacks Consensus Estimate of 43 cents.
The Zacks Consensus Estimate for 2013 moved north by 14.8% to $1.47 per share over the last 90 days. The estimate for 2014 also rose to $1.71 from $1.52 over the same period reflecting an increase of 12.5%
Other Stocks to Consider
Investors interested in the medical industry can also consider stocks like NuVasive, Inc. (NUVA), McKesson Corp. (MCK) and Cardinal Health, Inc. (CAH). While NuVasive sports a Zacks Rank #1 (Strong Buy), McKesson Corp. and Cardinal Health carry the same Zacks Rank as Align Technology.
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