Dental Firm Envista Q3 Performance Disappoints, Uncertainty, Macro Headwinds To In Short Term

Wednesday, after close, Envista Holdings Corporation NVST reported Q3 sales of $631.3 million, almost flat Y/Y, missing the consensus of $648.636 million. Core sales increased 0.8% over the corresponding quarter in 2022.

Adjusted EPS reached $0.43 compared to $0.47 a year ago and missing the consensus of $0.46. Adjusted EBITDA declined from $123.5 million to $127.6 million.

Guidance: The company said that due to the continued uncertainties in the macro environment, volatility in the North American distribution channel, and continued investment in long-term growth initiatives, it expects FY23 core sales to be down slightly and adjusted EBITDA margin to be between 18%-19%.

Piper Sandler downgraded the stock to Neutral from Overweight with a price target of $25, saying that after the commentary on the earnings conference call, the analysts Jason Bednar and Joseph Downing have little conviction in continuing to recommend the purchase of this stock. 

The macroeconomic landscape is increasingly uncertain, and NVST's business composition makes the company particularly vulnerable to economic fluctuations. 

Even NVST's more resilient segments, such as B&W orthodontics and consumables, have now entered the realm of unpredictability.

Maintaining objectivity, Piper analysts cannot confidently assert that NVST's U.S. implant business will experience a resurgence in market growth in the upcoming year. 

Furthermore, concerns persist regarding the trajectory of market growth in the next 12 months, given the ongoing decline in consumer spending on discretionary dental care over the past 3-6 months.

William Blair writes that Envista's journey in 2023 has been characterized by ongoing macroeconomic and geopolitical challenges, with new obstacles emerging each quarter. 

These challenges have overshadowed the gains in implant shares, the remarkable 60% year-to-date growth of Spark, and the margin efficiencies achieved in EBS. 

William Blair anticipates that the company's shares will likely remain within a certain price range for the next few quarters as Envista addresses these headwinds and makes strategic investments in future growth. Nevertheless, keeps the Outperform rating.

Price Action: NVST shares are down 9.22% at $20.92 on the last check Thursday.