The Board of leading dental products maker DENTSPLY International (XRAY) recently increased the company’s authorization to buy back shares under its stock repurchase program. Under this authorization, the company may now repurchase up to 34 million shares in the open market or in negotiated transactions, representing an increase of 12 million shares in the repurchase authorization.
Earlier, DENTSPLY had an authorization to buy back up to 22 million shares of treasury stock under its share repurchase program. The company bought back 6.7 million shares for $224 million in fiscal 2010 and, so far, has repurchased just over 2 million shares in 2011.
The increase in the repurchase authorization underscores the Pennsylvania-based company’s commitment to boost shareholder value leveraging a solid balance sheet and healthy free cash flows. Nonetheless, DENTSPLY has indicated that acquisitions would remain the top priority for the use of its cash.
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’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 international operations are exposed to foreign exchange translation risk given the devaluation of the euro against the U.S. dollar.
Moreover, DENTSPLY’s domestic market, which although has shown some improvements lately (with positive internal growth), still remains challenged given a slow economic recovery and competitive pressure.
DENTSPLY recently withdrew its earnings forecast for fiscal 2011, triggered by the uncertainties over the impact of the Japan disaster on its business. Japan is one of the markets which has the highest level of expenditures for dental care. We are currently Neutral on DENTSPLY.
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