DENTSPLY International Inc. (XRAY) reported third-quarter 2014 adjusted earnings of 62 cents per share, which beat the Zacks Consensus Estimate by a couple of cents. Earnings per share (EPS) increased 9% from the year-ago period due to margin expansion in the quarter under review.
Quarter Details
Sales increased a modest 0.6% year over year to $708 million in the quarter, which missed the Zacks Consensus Estimate. Excluding precious metals content, sales increased 1.8% from the year-ago quarter to $681.5 million. DENTSPLY’s top-line continues to suffer on account of a sluggish market in both the U.S and Europe.
Gross margin expanded 130 basis points (bps) on a year-over-year basis to 54.8%.
Selling, general & administrative expense (SG&A) increased 2.5% from the year-ago quarter to $276 million.
Despite higher SG&A, operating margin – excluding one-time items – expanded 80 bps on a year-over-year basis to 18.7% due to higher gross margin base.
DENTSPLY exited the third quarter with cash and cash equivalents of $97.7 million. Total debt was approximately $1.17 billion as of Sep 30.
Outlook
For 2014, DENTSPLY expects adjusted EPS in the range of $2.49 to $2.53 (prior outlook $2.47 to $2.55). At the mid-point, EPS is 6.8% higher than $2.35 reported in 2013. Currently, the Zacks Consensus Estimate is pegged at $2.52, which is higher than the mid-point of the guided range.
Our Take
Although the company reported a beat on the earnings front, we remain unimpressed with DENTSPLY’s flat top line and sales miss in the third quarter. Despite a sluggish market in the U.S. and Europe, we believe a diversified product range and significant investments in product innovation should help the company eventually expand its share in the dental market.
However, DENTSPLY’s revised outlook will remain an overhang on the stock. Although improving margins represent a potential upside for the company, sluggish top-line growth poses a major concern.
Currently, DENTSPLY carries a Zacks Rank #4 (Sell). Better-ranked medical/dental suppliers stocks that warrant a look include Bio-Reference Laboratories Inc. (BRLI), Henry Schein (HSIC) and Steris Corp (STE). All of them carry a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment