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XRAY – Market expectations are for Uniform ROA to rebound, but management may have concerns about organic sales, margins, and the implant market

March 25, 2021

  • DENTSPLY SIRONA, Inc. (XRAY:USA) currently trades above corporate averages relative to UAFRS-based (Uniform) earnings, with a 28.1x Uniform P/E. At these levels, the market is pricing in bullish expectations for the firm, but management may have concerns about their organic sales growth, operating margins, and opportunities in the implant market

  • Specifically, management may lack confidence in their ability to meet long-term organic sales growth guidance, achieve their annual clear aligner sales run rate target, and sustain Consumables segment improvements. In addition, they may have concerns about declines in patient volumes, their decision to raise R&D spend, and the margin impact of acquisition-related costs. Furthermore, management may lack confidence in their ability to sustain operating margin improvement, maintain margins while increasing their discretionary spending and e-commerce investment, and expand in the implant market through the Datum and Atlantis businesses. Moreover, they may be exaggerating the long-term opportunities in the implant market, their sales force’s ability to focus on high-volume implant doctors, and the progress of their ESG implementation plan