DENTSPLY (XRAY) Beats on Q1 Earnings - Analyst Blog

DENTSPLY International Inc. XRAY posted a 13.5% rise in adjusted net earnings to $85.5 million or 59 cents per share for the first quarter of 2014 from $75.2 million or 52 cents for the comparable quarter of 2013. With this, earnings per share surpassed the Zacks Consensus Estimate by 4 cents.

Net revenues in the quarter edged down 0.3% to $730.1 million and lagged the Zacks Consensus Estimate of $752 million. The decrease was attributable to modest sales growth in the U.S. and lower sales in Europe. Excluding precious metals content, net revenues rose 2.5% to $689.2 million.

Adjusted operating earnings escalated 12.2% to $122.0 million from $108.7 million in the year-ago quarter. Adjusted operating margin expanded 190 bps to 16.7% in the quarter from 14.8% in the year-ago quarter.

XRAY had cash and cash equivalents of $55.8 million as of Mar 31, 2014, down 25.5% from $75.0 million at the end of 2013. Long-term debt decreased to $1,065.5 million as of Mar 31, 2014 from $1,166.2 million as of Dec 31, 2013.

Cash flow from operations jumped 78.9% to $64.6 million in the quarter from $36.1 million in the year-ago quarter. Capital expenditure for the quarter went up 5.4% to $25.3 million in the quarter from $24.0 million in the 2013-first quarter.

For 2014, XRAY narrowed its adjusted-earnings per share guidance to the band of $2.47 to $2.55 from the earlier range of $2.45 to $2.55, reflecting a 5.1% to 8.5% rise on a year-over-year basis. The current Zacks Consensus Estimate of $2.52 lies within the guided range.

Although the bottom line beat estimates, we remain unimpressed by XRAY's flat top line and revenue miss in the fourth quarter and the year. This is mainly due to ongoing difficult dental market trends in Europe.  However, we note that the company performed well in the U.S. Moreover, improving margins represent a potential upside for XRAY.

Currently, XRAY has a Zacks Rank #2 (Buy). Other medical/dental suppliers stocks that warrant a look include Becton, Dickinson and Co. BDX, The Cooper Companies Inc. COO, and Steris Corp. STE. All of them carry a Zacks Rank #2 (Buy).