Leading dental products maker DENTSPLY International (XRAY) posted fourth-quarter fiscal 2010 adjusted earnings per share of 51 cents, a penny ahead of the Zacks Consensus Estimate while surpassing the year-ago adjusted earnings of 48 cents.
For fiscal 2010, adjusted earnings of $1.90 a share beat the Zacks Consensus Estimate of $1.89 and exceeded the year-ago earnings of $1.84.
Adjusted earnings exclude one-time items such as restructuring and acquisition-related charges as well as tax-related adjustments. Net income (attributable to the company) for the quarter fell 9.4% year over year to $67.8 million (or 47 cents a share) as the company spent more on account of selling, general and administrative as well as restructuring expenses. For the full year, profit dipped 3.1% to $265.7 million (or $1.82 per share).
Net sales for the quarter were $568.2 million, essentially flat year over year, missing the Zacks Consensus Estimate of $571 million. Excluding the precious metal content, net sales edged up 0.3% to roughly $521.3 million. Sales were hit by an unfavorable foreign exchange translation. For fiscal 2010, net sales increased 2.9% year over year to $2,221 million, modestly below the Zacks Consensus Estimate of $2,224 million.
Margins & Expenses
Gross margin for the quarter improved to 50.6% from 49.8% a year-ago owing to lower cost of sales (down 1.4%). Operating margin, however, declined to 16.8% from 18.2% a year-ago, primarily impacted by higher restructuring costs which climbed nearly six fold to roughly $5.7 million.
Financial Health
The company exited fiscal 2010 with cash and cash equivalents of roughly $540 million, up 20% year over year. However, long-term debt increased 56% year over year to roughly $604 million.
Outlook
Backed by a recovery in the global dental market and new product launches, DENTSPLY expects to post improved top and bottom line growth in fiscal 2011. The company expects earnings per share for the year in the band of $2.00 to $2.08. The current Zacks Consensus Estimate of $2.06 is within this guidance range.
DENTSPLY’s products are used in over 120 countries enabling it to leverage the changing dental practice across North America and Western Europe, which emphasizes preventive care and cosmetic dentistry. One of the company’s major customers is Henry Schein Inc (HSIC), a dental products distributor.
DENTSPLY recently collaborated with GlaxoSmithKline (GSK) to develop oral care products for use in dentist offices. The deal enables the company to co-brand its NUPRO prophylaxis pastes with GlaxoSmithKline’s coveted Sensodyne toothpaste brand.
DENTSPLY’s diverse product range, significant international presence, new product introductions and acquisition initiatives are expected to boost operating metrics over the forthcoming quarters.
However, the company’s domestic market remains challenged due to a slow economic recovery and competitive pressure and its international operations are exposed to foreign exchange translation risk. We are currently Neutral on DENTSPLY, backed by a short-term Zacks #3 Rank (Hold).
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