Align Technology, Inc. ALGN delivered first-quarter fiscal 2024 adjusted earnings per share (EPS) of $2.14, up 17.6% from the year-ago earnings. The reported figure topped the Zacks Consensus Estimate by 8.1%.

GAAP EPS for the quarter was $1.39 compared with $1.14 in the same period last year.

Revenues

Revenues increased 5.8% year over year to $997.4 million in the quarter and exceeded the Zacks Consensus Estimate by 2.6%. Moreover, revenues were favorably impacted by the foreign exchange of approximately $10 million sequentially.

Segments in Detail

The company has two reportable segments — Clear Aligner and Imaging Systems and CAD/CAM Services (Systems and Services)

Revenues in the Clear Aligner segment were up 3.5% year over year to $817.3 million. The upside reflects revenue growth across the regions from strong year-over-year volume growth across APAC markets and the EMEA region.

Revenues were unfavorably impacted by a foreign exchange of approximately $3.9 million (or 0.5%) year over year.

Revenues from Imaging Systems & CAD/CAM Services were up 2.4% to $180.2 million in the quarter. Revenues witnessed an unfavorable currency impact of 0.5% year over year.

Margins

The gross profit in the first quarter was $697.8 million, up 5.6% year over year. The gross margin in the quarter under review contracted 9-basis points (bps) year over year to 70.0% on an increase of 6.1% in the cost of net revenues.

During the quarter, SG&A expenses increased 2.8% to $451.8 million, while R&D expenses rose 5% to $91.9 million.

Align Technology, Inc. Price, Consensus and EPS Surprise

Align Technology, Inc. price-consensus-eps-surprise-chart | Align Technology, Inc. Quote

The operating income in the quarter under review was $154.1 million, increasing 15.4%. The operating margin expanded 130 bps to 15.5%.

Financial Details

Align Technology exited the first quarter of 2024 with cash and cash equivalents of $865.8 million compared with $937.4 million recorded at the end of the fourth quarter.

The cumulative net cash provided by operating activities at the end of the first quarter was $28.7 million compared with 199.9 million in the year-ago period.

Stock Repurchase

In January 2024, Align Technology repurchased approximately 1.1 million shares in total at an average price per share of $230.13 under the Q4'23 ASR contract. There remains $650.0 million available for repurchase of its common stock under its January 2023 Repurchase Program.

During the second quarter of 2024, the company anticipates repurchasing up to $150.0 million of its common stock through either a combination of open market repurchases or an accelerated stock repurchase agreement.

Guidance

Align Technology updated its financial outlook for full-year 2024 and provided second quarter 2024 outlook.

For the full year, ALGN anticipates revenues to be up 6-8% year over year (up from the previous guidance of up mid-single digits in 2023). The Zacks Consensus Estimate for the company’s 2024 revenues is pegged at $4.04 billion.

Both GAAP and adjusted operating margins for the full year are anticipated to be slightly above the 2023 GAAP and adjusted operating margins, respectively.

The company expects to invest approximately $100 million in capital expenditures, primarily related to building construction and improvements and manufacturing capacity, to support continued expansion.

For the second quarter of 2024, ALGN anticipates worldwide revenues in the range of $1.03 billion-$1.05 billion. The Zacks Consensus Estimate is pegged at $1.03 billion.

Our Take

Align Technology exited the first quarter of 2024 with better-than-expected earnings and revenues. On a year-over-year basis, first-quarter revenue growth was up across all regions and was driven by strong Clear Aligner volumes, primarily in the Asia Pacific region. The upside also reflects strength in the orthodontic channel with total Invisalign case starts from teens and younger patients.

During the quarter, the company achieved several significant milestones. Align Technology completed the acquisition of Cubicure GmbH — a leader in direct 3D printing solutions, which is the foundation for its next-generation aligner manufacturing. The company also successfully launched the iTero Lumina intraoral scanner — the latest generation of digital scanning technology.

Further, the raised 2024 revenue outlook looks encouraging.

Escalating costs and the contraction of gross margin are discouraging.

Zacks Rank and Other Key Picks

Align Technology currently carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks from the broader medical space are Inspire Medical Systems INSP, ICU Medical ICUI and Exact Sciences EXAS.

Inspire Medical Systems, sporting a Zacks Rank #1 (Strong Buy), reported a fourth-quarter 2023 EPS of 49 cents, beating the Zacks Consensus Estimate of a loss of 4 cents. Revenues of $192.5 million topped the consensus estimate by 0.1%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Inspire Medical Systems has an estimated earnings growth rate of 51.4% in 2024 compared with the industry’s 19.4%. The company’s earnings surpassed estimates in each of the trailing four quarters, the average being 353.6%.

ICU Medical, flaunting a Zacks Rank #1, reported a fourth-quarter 2023 adjusted EPS of $1.57, which surpassed the Zacks Consensus Estimate by 33.1%. Revenues of $587.9 million outpaced the Zacks Consensus Estimate by 4.1%.

ICUI has an estimated next-year earnings growth rate of 43.9% compared with the industry’s 25.3%. The company surpassed earnings estimates in each of the trailing four quarters, the average being 25.54%.

Exact Sciences, carrying a Zacks Rank #2, reported a fourth-quarter 2024 loss of 27 cents per share, narrower than the Zacks Consensus Estimate of a loss of 53 cents. Revenues of $646.9 million topped the Zacks Consensus Estimate by 2.4%.

EXAS has an estimated earnings growth rate of 23.9% in 2024 compared with the industry’s 13% growth. The company’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 51.5%.

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