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Align Technology Stock Dips on Macroeconomic Issues, FX Headwind
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Align Technology’s (ALGN - Free Report) dental procedures are being impacted by the current economic uncertainty in the form of geopolitical complications and cost escalation. Currency impact continues to dent growth. Over the past three months, the stock has lost 11.4% compared with the industry’s 2.4% decline. The stock carries a Zacks Rank #4 (Sell) currently.
The ongoing industry-wide trend of staffing shortages and supply chain-related hazards is denting margins for Align Technology. Deteriorating international trade, with global inflationary pressure leading to a tough situation related to raw material and labor costs, as well as freight charges and rising interest rates, have put the dental treatment space (which is highly elective) in a tight spot.
Added to this, Align Technology is also affected by the military conflict globally. The company currently anticipates increasing headwinds from macroeconomic uncertainty and potential supply issues related to the war in the Middle East in the upcoming period. As a result of this, in the second quarter, the company’s gross margin contracted 95 basis points (bps) year over year to 70.3% on an increase of 5.9% in the cost of net revenues.
Further, foreign exchange is a major headwind for Align Technology due to a considerable percentage of its revenues coming from outside the United States (in 2023, 44% of the company’s consolidated revenues came from international regions).
During the second quarter of 2024, Clear Aligner Average Selling Price (ASP) was down sequentially and lower than the company’s outlook, partly due to the significant impact of unfavorable foreign exchange across multiple currencies, especially the Japanese yen, euro and Brazilian real. Clear Aligner revenues had a 1.7% unfavorable foreign exchange impact. For Imaging Systems and CAD/CAM Services, too, the top line witnessed an unfavorable currency impact of 1.7% year over year in the second quarter.
Image Source: Zacks Investment Research
In recent times, Align Technology has also faced a decline in Invisalign ASPs for comprehensive treatment options. This resulted in a decline in the company’s revenues. In the second quarter, in particular, the company faced a sequential decline in ASP, primarily reflecting higher discounts and unfavorable product mix shifts to lower ASP products. On a year-over-year basis, the decrease in non-comprehensive ASPs reflected higher discounts, a product mix shift to lower ASP products and an unfavorable impact of a price adjustment in the U.K. to make the recently mandatory application of VAT to clear aligner prices.
A Major Upside for ALGN Stock
On a positive note, Align Technology is strategically capturing the growing malocclusion market. Malocclusion is one of the most prevalent clinical dental conditions in the world. According to Align Technology’s March 2024 data, the condition currently affects approximately 60% to 75% of the global population. The company estimates that there are approximately 600 million people globally with malocclusion. Annually, only 22 million people globally elect treatment by orthodontists, which means that a large portion of the patient base is unattended. The company also noticed that almost its entire patient base could be treated with Invisalign Clear Aligner. This represents a significant growth opportunity to increase its share of the existing global market of orthodontic case starts, especially among teens, and expand the market for digital orthodontics, especially among adults.
In the second quarter of 2024, volumes increased 6.2% sequentially and 3.2% year over year, driven by growth from adult patients, and strong teen case starts across regions, led by strength in Asia Pacific, EMEA and Latin America. The second-quarter results also reflected a record number of doctors submitting cases, and record shipment to doctors for the quarter. In the second quarter of 2024, adult patient case starts were up 5% sequentially and 1% year over year, reflecting the highest number of adult shipments in eight quarters, driven by strength in the GP channel, led by North America and APAC dentists.
Intuitive Surgical’s shares have surged 56.5% in the past year. Estimates for the company’s earnings have remained constant at $6.67 per share for 2024 in the past 30 days.
ISRG’s earnings beat estimates in each of the trailing four quarters, delivering an average surprise of 8.97%. In the last reported quarter, it posted an earnings surprise of 16.34%.
Estimates for TransMedics’ 2024 earnings per share (EPS) have moved up 48.1% to $1.20 in the past 30 days. Shares of the company have soared 132.3% in the past year compared with the industry’s 11.6% growth.
TMDX’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 287.50%. In the last reported quarter, it delivered an earnings surprise of 66.67%.
Estimates for Boston Scientific’s 2024 EPS have increased 1.7% to $2.40 in the past 30 days. In the past year, shares of BSX have risen 52.1% compared with the industry’s 16.5% growth.
In the last reported quarter, BSX delivered an earnings surprise of 6.90%. BSX’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 7.18%.
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Align Technology Stock Dips on Macroeconomic Issues, FX Headwind
Align Technology’s (ALGN - Free Report) dental procedures are being impacted by the current economic uncertainty in the form of geopolitical complications and cost escalation. Currency impact continues to dent growth. Over the past three months, the stock has lost 11.4% compared with the industry’s 2.4% decline. The stock carries a Zacks Rank #4 (Sell) currently.
The ongoing industry-wide trend of staffing shortages and supply chain-related hazards is denting margins for Align Technology. Deteriorating international trade, with global inflationary pressure leading to a tough situation related to raw material and labor costs, as well as freight charges and rising interest rates, have put the dental treatment space (which is highly elective) in a tight spot.
Added to this, Align Technology is also affected by the military conflict globally. The company currently anticipates increasing headwinds from macroeconomic uncertainty and potential supply issues related to the war in the Middle East in the upcoming period. As a result of this, in the second quarter, the company’s gross margin contracted 95 basis points (bps) year over year to 70.3% on an increase of 5.9% in the cost of net revenues.
Further, foreign exchange is a major headwind for Align Technology due to a considerable percentage of its revenues coming from outside the United States (in 2023, 44% of the company’s consolidated revenues came from international regions).
During the second quarter of 2024, Clear Aligner Average Selling Price (ASP) was down sequentially and lower than the company’s outlook, partly due to the significant impact of unfavorable foreign exchange across multiple currencies, especially the Japanese yen, euro and Brazilian real. Clear Aligner revenues had a 1.7% unfavorable foreign exchange impact. For Imaging Systems and CAD/CAM Services, too, the top line witnessed an unfavorable currency impact of 1.7% year over year in the second quarter.
Image Source: Zacks Investment Research
In recent times, Align Technology has also faced a decline in Invisalign ASPs for comprehensive treatment options. This resulted in a decline in the company’s revenues. In the second quarter, in particular, the company faced a sequential decline in ASP, primarily reflecting higher discounts and unfavorable product mix shifts to lower ASP products. On a year-over-year basis, the decrease in non-comprehensive ASPs reflected higher discounts, a product mix shift to lower ASP products and an unfavorable impact of a price adjustment in the U.K. to make the recently mandatory application of VAT to clear aligner prices.
A Major Upside for ALGN Stock
On a positive note, Align Technology is strategically capturing the growing malocclusion market. Malocclusion is one of the most prevalent clinical dental conditions in the world. According to Align Technology’s March 2024 data, the condition currently affects approximately 60% to 75% of the global population. The company estimates that there are approximately 600 million people globally with malocclusion. Annually, only 22 million people globally elect treatment by orthodontists, which means that a large portion of the patient base is unattended. The company also noticed that almost its entire patient base could be treated with Invisalign Clear Aligner. This represents a significant growth opportunity to increase its share of the existing global market of orthodontic case starts, especially among teens, and expand the market for digital orthodontics, especially among adults.
In the second quarter of 2024, volumes increased 6.2% sequentially and 3.2% year over year, driven by growth from adult patients, and strong teen case starts across regions, led by strength in Asia Pacific, EMEA and Latin America. The second-quarter results also reflected a record number of doctors submitting cases, and record shipment to doctors for the quarter. In the second quarter of 2024, adult patient case starts were up 5% sequentially and 1% year over year, reflecting the highest number of adult shipments in eight quarters, driven by strength in the GP channel, led by North America and APAC dentists.
Key Picks
Some better-ranked stocks in the broader medical space are Intuitive Surgical (ISRG - Free Report) , TransMedics Group (TMDX - Free Report) and Boston Scientific (BSX - Free Report) . While Intuitive Surgical and TransMedics sport a Zacks Rank #1 (Strong Buy) each, Boston Scientific currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Intuitive Surgical’s shares have surged 56.5% in the past year. Estimates for the company’s earnings have remained constant at $6.67 per share for 2024 in the past 30 days.
ISRG’s earnings beat estimates in each of the trailing four quarters, delivering an average surprise of 8.97%. In the last reported quarter, it posted an earnings surprise of 16.34%.
Estimates for TransMedics’ 2024 earnings per share (EPS) have moved up 48.1% to $1.20 in the past 30 days. Shares of the company have soared 132.3% in the past year compared with the industry’s 11.6% growth.
TMDX’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 287.50%. In the last reported quarter, it delivered an earnings surprise of 66.67%.
Estimates for Boston Scientific’s 2024 EPS have increased 1.7% to $2.40 in the past 30 days. In the past year, shares of BSX have risen 52.1% compared with the industry’s 16.5% growth.
In the last reported quarter, BSX delivered an earnings surprise of 6.90%. BSX’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 7.18%.