DENTSPLY SIRONA XRAY is well-positioned for growth due to its new digital-implant work flow and continued focus on research and development. However, forex headwinds and demand softness in Europe remain a concern.
Shares of this Zacks Rank #3 (Hold) company have lost 33.9% year to date compared with the industry's 1.6% decline. The S&P 500 index has gained 8.4% in the same time frame.
XRAY, with a market capitalization of $3.79 billion, is a global leader in the design, development, manufacturing and marketing of dental consumables, dental laboratory products, dental specialty products and consumable medical device products. It anticipates earnings to improve 10.5% over the next five years.
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Factors Favouring XRAY’s Growth
New Digital-Implant Workflow in Dentistry: DENTSPLY's Azento solution is reshaping digital implant workflows by streamlining planning, purchase and delivery in single-tooth replacements, now also available in Canada and Europe. Backed by its strong X-ray, imaging and digital impression portfolio, the company is well-positioned in the growing $20 billion global tooth-replacement market. Demand is rising for 3D imaging and treatment centers, driven by tech upgrades and supply-chain recovery. DENTSPLY’s rapid scale-up in clear aligners further strengthens its digital dentistry ecosystem.
R&D Boosts Product Innovation: DENTSPLY’s overall growth strategy rests on product innovation. The company’s solid internal growth, despite challenging macroeconomic headwinds, is primarily driven by its innovative new products. XRAY pursues several R&D initiatives to support technological development. The company’s R&D has increased in 2024 as it is focused on delivering innovation and excellent solutions to customers.
In the fourth quarter of 2024, XRAY’s spending on R&D was $42 million, however, the momentum is anticipated to continue as 2025 progresses. This, in turn, will enable DENTSPLY to focus on a more significant and sustainable innovation.
Restructuring Plan: DENTSPLY completed a comprehensive plan (includes a restructuring) to accelerate revenue growth, expand margins and simplify its business during the second quarter. The company made workforce reductions largely outside Europe. XRAY rationalized its SKUs in Europe as well as the United States to enable sustained profitability. These initiatives have resulted in annual savings of $200 million.
The company has identified another $80 million to $100 million in annualized structural and operational synergies, which are likely to be realized in the next 12-18 months. DENTSPLY started the second phase of its transformation plan during the third quarter of 2024. These plans will improve operational performance and likely lead to earnings growth.
What is Weighing on the Stock?
Foreign Exchange Headwinds: DENTSPLY has a significant international presence. Therefore, a strengthening U.S. dollar, especially against the euro as well as emerging market currencies, negatively impacts the company’s results. The company faces significant pricing pressure due to intensifying competition. DENTSPLY conducts its operations, both domestic and foreign, under highly competitive market conditions. The size and number of the company’s competitors vary by product line and from region to region.
Demand Softness in Europe: A softness in demand for CAD/CAM products in Europe, especially in Germany, has led to a decline in sales during 2024. Germany is the second-largest dental market in the world after the United States. The deterioration in demand for capital equipment and overall patient volumes is likely to continue in the next couple of quarters. A continued softness in demand does not bode well for DENTSPLY.
XRAY’s Estimate Trend
The Zacks Consensus Estimate for 2025 revenues is pegged at $3.57 billion, indicating a 5.9% decrease from the level of 2024.
The consensus mark for adjusted earnings per share is pinned at $1.81 for 2025, indicating an 8.4% year-over-year improvement.
Stocks to Consider
Some better-ranked stocks from the broader medical space are AngioDynamics ANGO, Veeva Systems VEEV and Masimo MASI.
AngioDynamics, currently sporting a Zacks Rank #1 (Strong Buy), reported third-quarter fiscal 2025 adjusted earnings per share (EPS) of 3 cents against the Zacks Consensus Estimate of a loss of 13 cents. You can see the complete list of today’s Zacks #1 Rank stocks here.
Revenues of $72 million beat the Zacks Consensus Estimate by 2%. ANGO has an estimated fiscal 2026 earnings growth rate of 27.8% compared with the S&P 500 composite’s 10.5% growth. The company’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 70.9%.
Veeva Systems, sporting a Zacks Rank #1 at present, posted fourth-quarter fiscal 2025 adjusted EPS of $1.75, exceeding the Zacks Consensus Estimate by 10.1%. Revenues of $720.9 million surpassed the Zacks Consensus Estimate by 3.2%.
VEEV has an estimated long-term earnings growth rate of 26.6% compared with the industry’s 20.8% growth. The company’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 7.9%.
Masimo, currently sporting a Zacks Rank #1, reported a fourth-quarter 2024 adjusted EPS of $1.80, which surpassed the Zacks Consensus Estimate by 20.8%. Revenues of $600.7 million topped the Zacks Consensus Estimate by 0.8%.
MASI has an estimated earnings yield of 3.5% for fiscal 2025 compared with the industry’s 3.6%. The company’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 14.4%.
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