XRAY – Market expectations are for Uniform ROA to decline, and management is confident about cost reductions, growth, operational improvements

• DENTSPLY SIRONA Inc. (XRAY:USA) is currently trading below recent averages relative to UAFRS-based (Uniform) Earnings, with an 18.2x Uniform P/E. At these levels, the market is expecting Uniform ROA to decline from 26% in 2017 to 16% through 2022, accompanied by 3% Uniform Asset growth going forward, but management is confident about margin improvement initiatives and driving growth
• Specifically, management appears confident about their ability to improve margins by reducing headcount in underperforming non-core business units. Additionally, they appear confident about regaining growth in their largest strategic unit, Technologies & Equipment through inventory destocking. Also, they appear confident about their newly-implemented supply chain systems. However, management may be concerned about their ability to successfully restructure their business, given the complexity of their post-merger portfolio. Specifically, they may be worried about their ability to deliver revenue growth while eliminating lower-margin business units. Furthermore, they may be worried about their sales team’s ability to produce demand-creation activity. Moreover, management may be overstating their leading position in clinical education. Finally, they may be understating their concerns regarding their ability to continue to reduce costs and realize revenue growth