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Envista (NVST) Up 6.8% Since Last Earnings Report: Can It Continue?

A month has gone by since the last earnings report for Envista (NVST). Shares have added about 6.8% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Envista due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Envista Q3 Earnings Miss Estimates, Gross Margin Down

Envista Holdings reported third-quarter 2023 adjusted earnings per share of 43 cents, down 8.5% year over year. The bottom line missed the Zacks Consensus Estimate by 6.5%.

The adjustments include charges and benefits related to the amortization of acquired intangible assets, certain asset impairment charges and asset impairments, among others.

The company’s earnings from continuing operations were 12 cents in the quarter compared with the year-ago quarter’s 28 cents, down 57.1%.

Revenues in Detail

Revenues totaled $631.3 million in the reported quarter, up 0.03% year over year. The metric lagged the Zacks Consensus Estimate by 3%.

The company witnessed the negative impact of both Russia and the weakness of higher-end specialty procedures in developed markets.

Segments in Detail

In the third quarter, Speciality Products & Technologies totaled $399.5 million, up 1%. The Speciality Products & Technologies delivered low-single-digit core growth as Spark outperformed.

Revenues in the Equipment & Consumables segment fell 1.7% year over year to $231.8 million in the quarter under review. The downside was due to the planned rationalization of traditional imaging portfolio.

Operational Update

Gross profit for the reported quarter fell 0.4% year over year to $363.3 million. Gross margin contracted 24 basis points (bps) to 57.5%.

Selling, general and administrative expenses were down 2.5% year over year to $257.7 million. Research and development expenses fell 14.2% year over year to $22.3 million.

Operating profit of $83.3 million surged 11.8% year over year. The operating margin expanded 139 bps to 13.2%.

Financial Update

Envista ended third-quarter 2023 with cash and cash equivalents of $824.2 million compared with $651.7 million at the end of second-quarter 2023. Total long-term debt was $1.38 billion at the end of the third quarter compared with $875.6 million at the end of the second quarter of 2023.

Net cash provided by operating activities at the end of the third quarter was $173.7 million compared with $72.4 million a year ago.

2023 Guidance

Due to the continued uncertainties in the macro environment, volatility in the North American distribution channel and the continued investment in its long-term growth initiatives, Envista expects full-year core sales to be down slightly.

The Zacks Consensus Estimate for 2023 revenues is pegged at $2.64 billion.

Adjusted EBITDA margin is expected to be between 18% to 19%

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

The consensus estimate has shifted -33.58% due to these changes.

VGM Scores

Currently, Envista has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Envista has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.

Performance of an Industry Player

Envista belongs to the Zacks Medical - Products industry. Another stock from the same industry, ResMed (RMD), has gained 5.1% over the past month. More than a month has passed since the company reported results for the quarter ended September 2023.

ResMed reported revenues of $1.1 billion in the last reported quarter, representing a year-over-year change of +16%. EPS of $1.64 for the same period compares with $1.51 a year ago.

For the current quarter, ResMed is expected to post earnings of $1.81 per share, indicating a change of +9% from the year-ago quarter. The Zacks Consensus Estimate has changed +1% over the last 30 days.

ResMed has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.

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