DENTSPLY International Inc. Earnings: Higher Expenses Shrinks Margins, Profit Declines

Rising costs hurt S&P 500 (NYSE:SPY) component DENTSPLY International Inc. (NASDAQ:XRAY) in the first quarter as profit dropped from a year earlier. DENTSPLY International manufactures and distributes dental equipment and products, including artificial teeth and dental consumable products.

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DENTSPLY International Earnings Cheat Sheet for the First Quarter

Results: Net income for DENTSPLY International Inc. fell to $53.3 million (37 cents per share) vs. $69.1 million (48 cents per share) a year earlier. This is a decline of 22.9% from the year-earlier quarter.

Revenue: Rose 25.6% to $716.4 million from the year-earlier quarter.

Actual vs. Wall St. Expectations: DENTSPLY International Inc. fell short of the mean analyst estimate of 52 cents per share. Analysts were expecting revenue of $718.7 million.

Quoting Management: Bret Wise, Chairman and Chief Executive Officer, stated, “We are pleased to report a strong start to fiscal 2012. Our new product portfolio continues to drive above-market base business growth in many sectors of dentistry, helping to overcome our supply constraints in orthodontics. Our orthodontics business has improved sequentially and we expect this to continue through the balance of 2012. We have also made substantial progress on our acquisition integration efforts, including going live with a new combined implant organization in the United States. The global dental market continued to grow in the first quarter, with strength in the U.S. offsetting slower conditions in Europe. Given these factors, we are confirming our earnings expectations on an adjusted basis for 2012 in the range of $2.22 to $2.30 per diluted share.”

Key Stats:

Gross margin shrank 7.4 percentage points to 45.2%. The contraction appeared to be driven by increased costs, which rose 45.2% from the year earlier quarter while revenue rose 25.6%.

Revenue has risen for the last four quarters. Revenue increased 29.9% to $738 million in the fourth quarter of the last fiscal year. The figure rose 14.4% in the third quarter of the last fiscal year from the year earlier and climbed 7.8% in the second quarter of the last fiscal year from the year-ago quarter.

For three quarters in a row, the company’s net income has fallen. In the fourth quarter of the last fiscal year, net income fell 40.1% from the year earlier, while the figure fell 4.8% in the third quarter of the last fiscal year.

The company has fallen short of estimates for two consecutive quarters. In the fourth quarter of the last fiscal year, it missed expectations by one cent with net income of 51 cents versus a mean estimate of net income of 52 cents per share.

Looking Forward: The outlook for the company’s results in the upcoming quarter is unfavorable. The average estimate for the second quarter is 57 cents per share, down from 58 cents ninety days ago. At $2.26 per share, the average estimate for the fiscal year has fallen from $2.28 ninety days ago.

(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

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