Encouraging Square Beat for Align - Analyst Blog
January 31 2013 - 9:20AM
Zacks
Dental technology company
Align Technology Inc. (ALGN) reported fourth
quarter 2012 net earnings of $9.6 million (or 12 cents per share),
considerably lower than the year-ago net earnings of $20.4 million
(or 25 cents per share). The year-over-year decline was primarily
due to a goodwill impairment charge of $11.9 million (or 14 cents
per share) in the reported quarter associated with the scanner and
CAD/CAM services franchise of the company.
However, after adjusting for certain one-time items, adjusted
earnings were 27 cents per share (surpassing the company’s guidance
range of 21-23 cents), missing the year-ago adjusted earnings per
share by a penny. On the upside however, adjusted earnings per
share in the fourth quarter exceeded the Zacks Consensus Estimate
by 22.7%.
Adjusted earnings per share in 2012 increased 20.6% from 2011 to
$1.17, a 4.5% beat over the Zacks Consensus Estimate.
Total net revenues increased 10.8% year over year to $142.8 million
in the quarter surpassing the Zacks Consensus Estimate by 5.8%. It
also exceeded the company’s guidance band of $134.2−$137.8 million.
Year-over-year growth was solely driven by Invisalign Clear
Aligner.
Annual net revenues were $560 million, up 16.7% year over year and
edging past the Zacks Consensus Estimate by 1.4%. The robust sales
of Invisalign Clear Aligner resulted in a 70% jump in Invisalign
volume on the back of higher utilization and increased adoption in
2012.
Total Invisalign Clear Aligner revenues came in at $132.8 million,
up 11.7% year over year, driven by case shipments of 90.5 thousand
(up 9.6% year over year) in the quarter. However, the company
disappointed with its Scanner and CAD/CAM services revenues which
stood at $10 million, flat on a year-over-year basis.
The company recorded 33% of the total Invisalign Clear Aligner
sales from North America orthodontists (up 1.5% year over year to
$43.8 million), 36.1% from North American GP Dentists (down 0.7% to
$47.9 million), 24.5% from international market (up 6.6% to $30.4
million) and 6.6% from non-case revenues (up 22% to $8.7
million).
Gross margin expanded 40 basis points (bps) year over year to 74.5%
in the fourth quarter. The margin expansion was on account of
higher average selling price (ASP) as well as improved
manufacturing efficiencies. The company witnessed a 4.6% increase
in sales and marketing expenses to $37.8 million; 21% rise in
general and administrative expenses to $27.2 million and 22.4%
increase in research and development expenses to $11.7 million. As
a result, operating margin contracted 40 bps to 20.8% in the
quarter.
Align reported global ASP of $1,375 (versus $1,360 in the year-ago
period) and international ASP of $1,455 (versus $1,530 in the
prior-year quarter). The higher global ASP reflects increased ASP
for Invisalign in North America on the back of lower Advantage
rebates due to lower utilization by North American orthodontists in
the quarter.
Align exited 2012 with $356.1 million in cash, cash equivalents and
marketable securities compared with $248.0 million at the end of
2011.
Outlook
Align expects net revenues in the band of $146 million and $150.5
million for the first quarter of fiscal 2013. The Zacks Consensus
Estimate of $144 million lies below the company’s guidance
band.
The company forecast for earnings per share is in the range of 21
cents to 23 cents. The current Zacks Consensus Estimate of 26 cents
is above Align’s expectation.
Our Take
Align exited 2012 on an encouraging note with its fourth-quarter
results exceeding expectations. With the completion of step two of
the goodwill impairment analysis, the pressure on the bottom-line
should wane. We believe that manufacturing efficiencies and margin
expansion should further leverage Align’s earnings going
forward. We look forward to the company’s performance in 2013
with optimism.
The stock currently carries a short-term Zack Rank #3 (Hold).
However, medical stocks such as ResMed (RMD),
Cantel Medical (CMN) and Merit
Medical (MMSI), carrying a Zacks Rank #1 (Strong Buy) are
expected to do well and warrant a look.
ALIGN TECH INC (ALGN): Free Stock Analysis Report
CANTEL MED CORP (CMN): Free Stock Analysis Report
MERIT MEDICAL (MMSI): Free Stock Analysis Report
RESMED INC (RMD): Free Stock Analysis Report
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