Analyst Downgrades Dental Player Envista As Outlook Hinges on Improved Commercial Execution, Strategic Initiative Effectiveness

Wednesday, Envista Holdings Corporation NVST reported third-quarter 2024 sales of $645.6 million, beating the consensus of $643.44 million. Core sales declined 2% Y/Y in the quarter.

Net loss in the fourth quarter was $217.4 million or $1.27 per diluted share. The net loss included a $258.3 million non-cash charge related to the impairment of goodwill and intangible assets. 

Adjusted net income was $49.7 million or $0.29 per diluted share compared to adjusted net income of $91.9 million or $0.52 a year ago.

Adjusted EBITDA for the fourth quarter of 2023 was $100.5 million compared to $138.3 million in the fourth quarter of 2022. 

Amir Aghdaei, Chief Executive Officer, stated, “Despite a volatile macro backdrop in 2023, the Envista team delivered full year results in line with our expectations. For the full year 2023, we saw a modest decline in core growth and delivered an adjusted EBITDA margin of 18.1%. Our Orthodontic business continues to outperform, growing double digits for the full year 2023, with Spark Aligner growing over 50%.”

Guidance: Envista expects core sales to grow low-single digits and to deliver adjusted EBITDA margins of between 16% and 17%. 

The company anticipates that margins will accelerate as we move through 2024. The guidance considers long-term investments and the continued uncertainty in the macro environment.

William Blair downgraded Envista to Market Perform, noting its wait for execution on market-leading brands.

Envista is currently facing various challenges that are expected to impact its profit and loss statement until at least 2024. 

This situation is anticipated to limit the company’s stock performance over the next 12 months or possibly longer. While other players in the dental industry are also grappling with similar issues, Envista appears to be more vulnerable, resulting in larger challenges for its P&L. 

Although there is potential for improvement in Envista’s P&L statement by the second half of 2024, uncertainties surrounding the effectiveness and return on investment of strategic initiatives lead to caution. 

Despite positive indications from surveys and market data regarding key portfolio lines such as Nobel implants and Spark clear aligners, a more favorable outlook on share upside will depend on improved commercial execution.

Price Action: NVST shares traded 9.29% lower at $21.99 on the last check Thursday.

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