Morningstar | XRAY Updated Forecasts and Estimates from 10 Jan 2019
Dentsply Sirona's third-quarter results were below our expectations. We may modestly adjust our fair value estimate after we update our assumptions to incorporate management's new restructuring plan, but we are leaving our no-moat rating intact. The company's restructuring plan aims to achieve $200 million-$225 million in cost savings by 2021 and includes an expected 6%-8% net reduction in its global workforce. We think management's plan to simplify its research and development strategy is another step in the right direction, as the company's execution on its updated financial goals will require a resurgence in forward-looking innovation. While we believe the company will benefit from simplifying its footprint through internal consolidation amid its evaluation of underperforming businesses, we still remain skeptical that the company can return to historical growth rates.Broad segment weakness drove Dentsply Sirona's year-over-year 6.5% internal sales decline. CAD/CAM and imaging equipment destocking continued to drag on the company's technologies and equipment segment, which experienced a 9.3% internal sales decline compared with the year-ago period along with a roughly 1,330-basis-point decline in segment operating margin. Separately, operational issues and shipping delays for several product lines in Europe drove the 3% decline in the consumables business' revenue versus the year-ago period. The lower shipment volumes unfavorably affected the consumable product mix, and although we think the logistical disruption is mostly temporary, we do remain concerned about the company's competitive position in the less-differentiated general consumable category.
DENTSPLY SIRONA is a manufacturer of dental products and technologies. The company's Consumables segment is responsible for the design, manufacture, sales and distribution of the company's dental consumable products which include preventive, restorative, endodontic, and dental laboratory products. The company's Technologies and Equipment segment includes responsibility for the design, manufacture, sales and distribution of the company's dental technology and equipment products and healthcare consumable products, including dental implants, computer-aided design/computer-aided manufacturing systems, orthodontic clear aligner products, imaging systems, treatment centers, instruments, and consumable medical device products.
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