Sirona Dental Systems, Inc. (SIRO) posted about 9.5% rise in adjusted earnings to $52.4 million or 93 cents per share for the first quarter of fiscal 2014 ended Dec 31, 2013 from $47.8 million or 85 cents per share in the corresponding quarter of prior fiscal year. Earnings per share surpassed the Zacks Consensus Estimate by a penny. Following the earnings release, shares of the company went up 0.4% to $70.20 till yesterday.
Adjusted earnings in the fiscal 2014 quarter exclude amortization and depreciation expense resulting from the step-up to fair values of intangible assets related to past business combinations, and Compensation charge for expenses in connection with the CFO Transition.
Adjusted earnings in the fiscal 2013 quarter exclude amortization and depreciation expense resulting from the step-up to fair values of intangible assets related to past business combinations and non-cash measurement of deferred tax assets and liabilities due to an increase in German trade tax rate.
Revenues in the quarter grew 9.7% (6.3% on a constant currency basis) to $298.7 million, exceeding the Zacks Consensus Estimate of $297 million. Revenues in SIRO’s CAD/CAM Systems segment rose 10.7% (7.6% on a constant currency basis); Imaging Systems segment went up 9.2% (7.0% on a constant currency basis), Instruments segment increased 23.9% (18.1% on a constant currency basis), and Treatment Centers segment grew 1.7% (but down 3.0% on a constant currency basis) in the quarter.
Revenues in the U.S. grew 12.2% in the quarter driven by strong demand for Imaging and CAD/CAM products. Revenues in international markets rose 8.4% (3.4% in constant currency) due to growth in Europe (excluding Germany), and other international markets.
Gross profit improved 7.2% to $162.7 million while gross margin rose 130 basis points to 54.5% in the quarter. The improvement in gross margin reflects the development of product and regional sales mix as well as unfavorable impacts of foreign exchange rate fluctuations.
Financial Position
SIRO exited the quarter with cash and cash equivalents of $210.9 million, down 12.8% from $241.7 million as of Sep 30, 2013. Total debt remained nearly the same at $754.8 million as of Dec 31, 2013, compared with $754.5 million as of Sep 30, 2013. Debt-to-capitalization ratio fell 30 bps to 5.8% as of Dec 31, 2013 from 6.1% as of Sep 30, 2013.
In the fiscal 2014-quarter, SIRO had cash flow of $11.3 million from operations, down 66.5% from $33.7 million in the prior fiscal year mainly due to decrease in trade accounts payable as well as deferred taxes. Capital expenditures (net) more than quadrupled to $42.8 million from $10.3 million in the fiscal 2013-quarter.
Guidance Reiterated
For fiscal 2014, SIRO retained its revenue and earnings guidance. The company continues to expect revenue growth in the range of 4 to 6% in constant currency. The growth assumed 20% constant currency growth in its two largest markets, the U.S. and Germany.
SIRO also anticipates adjusted earnings in the range of $3.60 to $3.70 per share, implying a growth of 6 to 9%. The Zacks Consensus Estimate of $3.66 lies within the guided range.
Our Take
SIRO is the world’s leading provider of dental CAD/CAM systems. Currently, it carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the medical instruments industry that worth a look include Natus Medical Inc. (BABY), ABIOMED, Inc. (ABMD), and AngioDynamics Inc. (ANGO). Natus Medical carries a Zacks Rank #1 (Strong Buy), while both ABIOMED and AngioDynamics carry a Zacks Rank #2 (Buy).
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