Revamped E-commerce And Imaging Products Will Secure Success

Key Takeaways

• Strategic divestment of Wellspect HealthCare aims to unlock value and improve net margins, leveraging its growth and profitability.
  
• Focus on innovation and e-commerce in aligners and new product launches expects revenue growth and margin improvements in key segments.
  
• Significant impairment charges, strategic challenges, and a worsened external environment could restrain revenue, net margins, and investor confidence.

Catalysts

Develops, manufactures, and markets dental equipment supported by cloud-enabled solutions, dental products, and healthcare consumable products in urology and enterology worldwide.

• DENTSPLY SIRONA anticipates improvements in performance and financial results through deploying capabilities from Byte to SureSmile, focusing on innovation and revamped e-commerce. This shift is expected to enhance revenue and earnings growth in the aligner segment by mid-2025.
  
• The strategic decision to potentially divest the Wellspect HealthCare business is aimed at unlocking value. This could positively impact net margins if completed, given Wellspect's strong growth and profitability.
  
• The continued relaunch of Orthophos SL and new product introductions like Primescan 2 are set to drive volume growth, particularly in imaging and scanners, which could lead to revenue expansion and margin improvements in the CTS segment.
  
• Implementing cost savings through transformational initiatives, including manufacturing and distribution footprint reductions, is expected to enhance overall EBITDA margins beyond 18% by the end of 2025.
  
• Strategic investments in a virtual sales team and enhancing commercial execution abilities are intended to increase direct sales outreach, potentially boosting sales revenue and optimizing operational efficiencies across various geographies.
  

DENTSPLY SIRONA Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming DENTSPLY SIRONA's revenue will decrease by 0.1% annually over the next 3 years.
• Analysts assume that profit margins will increase from -24.0% today to 6.0% in 3 years time.
• Analysts expect earnings to reach $226.5 million (and earnings per share of $1.06) by about May 2028, up from $-910.0 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $256 million in earnings, and the most bearish expecting $197 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 18.0x on those 2028 earnings, up from -3.1x today. This future PE is lower than the current PE for the US Medical Equipment industry at 30.8x.
• Analysts expect the number of shares outstanding to decline by 4.16% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.7%, as per the Simply Wall St company report.

DENTSPLY SIRONA Future Earnings Per Share Growth

Risks

• The company recorded significant noncash impairment charges of approximately $370 million due to weakened demand and competitive pressures in key segments, which could impact net margins and undermine investor confidence.
  
• The suspension of sales and marketing of Byte aligners resulted in financial adjustments, affecting revenue projections and could challenge future revenue stability and earnings.
  
• The company's prediction for organic sales decline between 2% to 4% in 2025, citing challenging macroeconomic conditions and competitive pressures, might hinder revenue growth and ultimately affect earnings.
  
• Increased tax rate projections due to geographic income mix and certain declining performance trends could negatively impact net margins and reduce overall net earnings.
  
• The expected weak external environment, particularly for equipment sales, along with anticipated declines in key segments such as CTS, could restrain revenue and profit growth.

Valuation

• The analysts have a consensus price target of $18.143 for DENTSPLY SIRONA based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $27.0, and the most bearish reporting a price target of just $14.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $3.8 billion, earnings will come to $226.5 million, and it would be trading on a PE ratio of 18.0x, assuming you use a discount rate of 8.7%.
  
• Given the current share price of $14.08, the analyst price target of $18.14 is 22.4% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.