Barrington Research Reassumes Coverage DENTSPLY On Limited Upside

Barrington Research reassumed coverage of DENTSPLY International Inc. (NASDAQ: XRAY), after an analyst transition. Michael Petusky and Tareq Affouri are now responsible for coverage and they issued a Market Perform rating. The firm had last rated it at Outperform (May 2014).

Although DENTSPLY is a leader in the professional dental consumables category, operating in more than 120 countries and generating roughly $3 billion in annual revenue, Petusky and Affouri think that “shares are currently trading within 10% of fair value,” after having gained about 14 percent over the past three months.

According to the report, the firm models $2.88 billion in revenue (excluding precious metal content) for 2015, and $2.93 billion for 2016.

Analysts expect gross margin expansion of 50 percent, and an 80 basis point reduction in SG&A expense (as a percentage of revenue), between 2014 and 2016.

“Key factors include the likely rationalization of manufacturing facilities, the probable discontinuation of certain lower margin products, and a cost-saving reorganization of certain facets of the company’s German lab business.”

Regarding earnings, Barrington is modeling adjusted EPS of $2.66 in 2015, and $2.84 in 2016, while anticipating a 140 basis point improvement in adjusted EBITDA margin between 2014 and 2016.