DENTSPLY International Raised to Hold - Analyst Blog

On Mar 11, Zacks Investment Research upgraded DENTSPLY International Inc. XRAY to a Zacks Rank #3 (Hold) from a Zacks Rank #4 (Sell).

Why the Upgrade?

On Feb 18, DENTSPLY International – a leading manufacturer and distributor of dental and other consumable medical device products, reported fourth-quarter 2013 adjusted net earnings per share of 61 cents, which beat the Zacks Consensus Estimate by a penny and surpassed the year-ago earnings of 56 cents by 8.9%.

Driven by constant currency growth in the U.S. and Rest of the World regions, net revenues in the quarter inched up 0.5% to $753.7 million but lagged the Zacks Consensus Estimate of $766 million. Excluding precious metals content, net revenues rose 1.5% to $713.7 million. The increase in revenues was however, partially offset by contraction in European sales.

DENTSPLY reported an improvement of 2.1% in adjusted operating income to $122.6 million in the quarter. Adjusted operating margin expanded 10 basis points to 17.2% in the quarter from 17.1% a year ago.

Long-term debt decreased to $1,166.2 million as of Dec 31, 2013 from $1,222.0 million recorded at the end of 2012. Long-term debt-to-equity ratio declined to 0.45 as of Dec 31, 2013 from 0.54 as of Dec 31, 2012, indicating a better leveraged position.

The company's adjusted earnings per share projection for 2014 lies in the range of $2.45 to $2.55, reflecting a 4% to 9% rise on a year-over-year basis. The increased earnings are expected to be driven by better global market conditions in the year. The current Zacks Consensus Estimate of $2.51 lies within the guided range.

Though DENTSPLY's top line missed the Zacks Consensus Estimate in the quarter, the bottom line successfully beat estimates. Moreover, the company managed to deliver positive earnings surprises in 3 of the last 4 quarters.

Positive earnings guidance and anticipated improvement in the global market conditions in 2014, combined with improving leveraged position and margins, represent a potential upside for DENTSPLY going forward.

Other Stocks to Consider

Some better-ranked stocks worth reckoning in the medical/dental supply industry include Align Technology Inc. ALGN, CR Bard Inc. BCR, and Becton, Dickinson and Company BDX. All the three stocks hold a Zacks Rank #2 (Buy).