It's been a month since Align Technology (ALGN) last reported earnings, and shares have risen about 1.2%, underperforming the S&P 500 in that time.
Will the recent positive trend continue leading up to its next earnings release, or will Align Technology see a pullback? Before we dive deeper 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.
Align Technology reports record second-quarter profit, gross margin shrinks
Align Technology reported second-quarter fiscal 2024 adjusted earnings per share of $2.41, up 8.6% from the year-ago period. The figure beat the Zacks Consensus Estimate by 3.9%.
GAAP earnings per share for the quarter were $1.28, down from $1.46 in the year-ago quarter. This represents a 12.3% decrease from the same period last year.
Revenue
Sales increased 2.6% year over year to $1.03 billion, missing the Zacks Consensus Estimate by just 0.9%. Revenues were negatively impacted by foreign exchange rates by approximately $18.1 million, or 1.7%, year over year.
Segment Details
The company has two reportable segments: Clear Aligners and Imaging Systems and CAD/CAM Services (Systems and Services).
Clear aligner segment revenues decreased 0.1% year over year to $831.7 million.
Clear aligner revenues were negatively impacted by foreign exchange rates by 1.7%.
Imaging systems and CAD/CAM services revenues increased 16.1% for the quarter to $196.8 million. Sales were also negatively impacted by foreign currency fluctuations, which increased 1.7% year over year.
margin
Second quarter gross profit was $722.6 million, an increase of 1.3% compared to the same period last year. Gross margin for the quarter was 70.3%, a decrease of 95 basis points (bps) compared to the same period last year due to a 5.9% increase in net cost of revenue.
Selling, general and administrative expenses decreased 0.2% to $452.3 million during the quarter, while research and development expenses increased 4.2% to $92.2 million.
Operating income was $178.2 million, up 3.6% from the prior year. Operating margin increased 17 basis points to 17.3%.
Financial Details
Align Technology ended the second quarter with cash and cash equivalents of $761.4 million, compared with $865.8 million recorded at the end of the first quarter.
Cumulative net cash provided by operating activities at the end of the second quarter was $188.5 million, down from $451.7 million in the same period last year.
Share buybacks
During the reported quarter, Align Technology repurchased a total of approximately 600,000 shares through $150 million of open market share repurchases.
The story continues
Currently, $500 million of shares are available for repurchase under ALGN's $1 billion share repurchase program authorized in January 2023.
guidance
Align Technology updated its full-year 2024 financial guidance and provided guidance for the third quarter of 2024.
For the full year, ALGN expects its sales to grow 4% to 6% year over year, down from the previous estimate of 6% to 8%. The Zacks Consensus Estimate for the company's 2024 sales is $4.12 billion, which would represent an increase of 6.6% from the prior-year reported figure.
Full-year 2024 GAAP operating margin is expected to be slightly lower than 2023 GAAP operating margin and 2024 non-GAAP operating margin is expected to be higher than 2023 non-GAAP operating margin.
The company expects to invest approximately $100 million in capital expenditures related primarily to building construction and improvements and manufacturing capacity to support its continued expansion.
ALGN expects its worldwide revenues to be in the range of $900 million to $1.0 billion for the third quarter of 2024. The Zacks Consensus Estimate is $1.03 billion.
How have estimates changed since then?
After all, estimate revisions have been trending downward over the past month.
These changes have caused the consensus estimate to shift by -6.12%.
VGM Score
Currently, Align Technology has a low Growth Score of F, but a fairly good Momentum Score of B. However, the stock has been given a rating of D on the Value side, placing it in the bottom 40% for this investment strategy.
Overall, the stock has an overall VGM Score of D. If you don't want to focus on one strategy, this is the score to keep an eye on.
Outlook
The company's stock price estimates have been trending downwards across the board, and the magnitude of this latest revision indicates a downward trend. It's no surprise that Align Technology has earned a Zacks Rank #4 (Sell). We expect the company's stock to deliver below-average returns in the coming months.
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Align Technology, Inc. (ALGN) : Free Stock Analysis Report
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