On Nov 30, 2015, we issued an updated research report on California-based Align Technology Inc. ALGN, a developer of aligner therapy, intra-oral scanners and CAD/CAM (computer-aided design and computer-aided manufacturing) digital services.
Align Technology delivered a mixed third-quarter 2015 with the top line exceeding the Zacks Consensus Estimate while the bottom line was merely in line with the same. On a brighter note, however, Align’s third quarter revenues comfortably exceeded the company’s expected guidance.
The solid sales growth was driven by impressive Invisalign volume growth across all customer channels and geographies. Per management, on a year-over-year basis, this growth reflects continued adoption of Align’s Invisalign product by existing ortho customers and expansion of its GP dentist base.
Particularly, continued momentum in EMEA and APAC, progress in North America, expansion in Align’s low-stage product segment and seasonally strong uptick in teenage patients drove Invisalign volume growth in the quarter. During this period, Align also witnessed positive customer response to its new sale structure in North America, wherein management expects to continue to make incremental investments in clinical education and customer support.
However, continued exposure to exchange rate fluctuations, owing to its extensive overseas business, poses a serious concern for the company in the near term. In fact, the company apprehends that exchange rate fluctuations might harm its business in the near future.
Indeed, in the last reported quarter, Align experienced lower average selling prices (ASPs) across all its customer channels owing to fluctuating exchange rates. These lower ASPs naturally brought down the gross margin figure for Align’s Clear Aligner segment substantially in the third quarter.
Unfortunately, Align does not expect any respite from the ongoing foreign currency headwinds in the near term. We are concerned about the ongoing economic uncertainty as well, which casts a shadow on Align’s dental procedures. This apart, the competitive landscape also remains an overhang.
Currently, Align carries a Zacks Rank #2 (Buy).
Key Picks in the Sector
Some other top-ranked med-dental/supply stocks are AmerisourceBergen Corporation ABC, Cardinal Health, Inc. CAH and DENTSPLY International Inc. XRAY. All three stocks also carry a Zacks Rank #2.
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