EUR 850.00 For Business Accounts Only

Morningstar | Straumann's Fiscal 4Q Results Continue to Show Impressive Growth

Straumann's fiscal fourth-quarter earnings results showed strength across its core businesses and mostly met our expectations. We do not anticipate major changes to our fair value estimate, and we are reiterating our narrow moat rating. The company's fiscal 2019 guidance includes roughly 13% organic revenue growth (versus our roughly 15% forecast) to accompany further improvements in EBITDA and EBIT margins. The company's outlook is typically conservative, which still seems to be the case for 2019, in our view. Separately, although we think corporate dentistry contract wins should provide short-term benefits to the company, we remain concerned about the increasing concentration of buyers on long-term pricing power.

Straumann posted healthy growth across all regions during the period, thanks to strength across the company's product categories. We think the company's premium and nonpremium implant businesses should continue to fuel the company's performance, with healthy clear aligner growth providing further benefit. During the period, Straumann's premium implant growth was driven by ongoing BLT implant strength in addition to its new BLX implant. We think the newly launched BLX implant will help Straumann steal market share in the fully tapered premium implant segment. Meanwhile, the company's ClearCorrect business posted roughly 81% clear aligner case growth compared with the year-ago period. We expect clear aligner growth to persist, thanks in part to Straumann's exclusive distribution agreement with ZhengLi's clear aligner unit in China.

Straumann's strong implant volume growth has provided an underlying benefit to gross margin during the year, but this was offset by higher contribution from third-party products, digital equipment, and clear aligners. Adjusted gross margin fell by 40 basis points to 75.4% for fiscal 2018. We think this trend is unlikely to abate, and we expect cost discipline to play a bigger role in maintaining profitability.

We are optimistic about Straumann's 2020 succession plan, which will transition Guillaume Daniellot from his current position of executive vice president of sales in North America, with current CEO Marco Gadola likely transitioning to Straumann's board of directors. Daniellot joined Straumann in 2007 as the managing director of Straumann France, and we think his long-term experience with the company should bode well for its trajectory. He became Straumann's head of Western Europe sales in 2013 and took on his current role as head of North American sales in 2016.