Discussing Dentsply Sirona’s Updated 2017 Guidance


Aug. 17 2017, Updated 7:36 a.m. ET

2017 guidance

Dentsply Sirona (XRAY) expects a stronger performance in the second half of fiscal 2017. The company expects its new distribution strategy in North America to benefit its sales and drive growth in 2H17 and beyond.

However, Dentsply Sirona made a downward revision to its fiscal 2017 guidance during the company’s 2Q17 earnings results announcement on August 9, 2017. This is due to the company’s underperformance in the first half of 2017 due to the inventory level changes. These changes resulted from the company’s distribution strategy transition and lower equipment sales to end users.

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Dentsply Sirona expects to register reported revenues, excluding precious metals, in the range of $3.95 billion–$3.99 billion, for fiscal 2017. This represents constant currency revenue growth of 2.5%–3.5%. The updated guidance compares to the company’s previous revenue guidance range of $3.95 billion–$4.03 billion, representing a constant currency revenue growth in the range of 2.5%–4.5%.

The updated guidance includes a net benefit of ~2.0% from acquisitions. Thus, the company’s internal growth in 2017 is expected to be in the range of 0.5%–1.5%.

Dentsply Sirona expects to register 2017 diluted EPS (earnings per share) in the range of $2.65–$2.75. This guidance compares to the previous outlook range of $2.80–$2.90.

The negative impact of foreign exchange for fiscal 2017 is also expected to be more pronounced than previous expectations and is estimated to impact XRAY’s earnings by $0.10–$0.12. The impact of its diluted share count increase is expected to be a headwind of $0.09 on the company’s earnings.

Investors interested in participating in the company’s potential performance growth can invest in the Vanguard Mid-Cap Growth ETF (VOT), which invests ~0.82% in XRAY.

Inventory reduction headwinds impact on XRAY’s fiscal 2017 performance

Dentsply Sirona’s distribution strategy transition has resulted in higher-than-expected inventory reductions in recent quarters. The company’s high-tech equipment retail sales in North America have also been weak. These sales are expected to improve by September when the company’s expanded distributions begin.

Patterson, which is an exclusive distribution partner of Dentsply Sirona, is undergoing several business changes that resulted in some sales force reduction at its end. These developments impacted Dentsply Sirona’s equipment sales to end users in 2Q17.

Further, sales mix consisting of lower sales of high-margin equipment and higher expense levels have impacted the company’s sales performance. Starting in 3Q17, Dentsply Sirona is expected to recover from some of these headwinds and begin registering improved performance. The company expects double-digit EPS growth in 2H17, which is estimated to translate to more than $600 million in adjusted net income for fiscal 2017.

Dentsply Sirona’s competitors Danaher (DHR), Zimmer Biomet Holdings (ZBH), and Integra Lifesciences (IART) are expected to register revenues of $18.0 billion, $7.8 billion, and $1.1 billion, respectively, in 2017.

Next, let’s look at the company’s latest analyst recommendations.


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