Material Weakness In Internal Control: Dentsply Stock Falls Despite Q2 Beat - What's Going On

Dentsply Sirona Inc XRAY reported Q2 adjusted EPS of $0.51, down 26% from $0.69 a year ago, beating the consensus of $0.43.

Sales of $1.03 billion increased 05% Y/Y (organic sales increased 2.3%), beating the consensus of $992.15 million.

"We are pleased with our second quarter results, the highlight of which was organic growth in all four segments. Notably, aligners delivered another quarter of double-digit growth, and our business in China returned to growth," said President and Chief Executive Officer Simon Campion.

Guidance: Dentsply Sirona estimates adjusted EPS of $1.91-$2.02, up from prior guidance of $1.85-$2.00 versus the consensus of $1.93.

The company is raising the midpoint of its 2023 net sales outlook by $75 million to a new range of $3.98 billion-$4.02 billion, with anticipated organic sales growth of approximately 3%, up from 0%-2% expected earlier.

The company identified a material weakness in internal control over financial reporting, which did not result in a material misstatement of the company's previously issued financial statements. The company intends to file an amendment to the 2022 Form 10-K.

William Blair analysts Brandon Vazquez and Justin Lin said the update is another wrinkle the new management team has to iron out as part of its transformation efforts. They maintain the Market Perform rating until more durable fundamental improvements are visible, especially with shares trading at 17 times the 2024 EPS estimate (above dental peers).

Price Action: XRAY shares are down 4.70% at $38.76 on the last check Thursday.

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