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Align Technology (ALGN) Q3 Earnings Top on Invisalign Sales

Align Technology, Inc. ALGN reported earnings per share (EPS) of $1.01 in the third quarter of 2017, substantially up 60.3% year over year. Earnings were also higher than the company’s guided range of 78-81 cents. The figure comfortably beat the Zacks Consensus Estimate of 82 cents.


Revenues grew 38.3% year over year to $385.3 million in the quarter, surpassing the Zacks Consensus Estimate of $360 million. This also remained well ahead of the company’s guided range of $355-$360 million.

Per management, a strong top line was driven by robust Invisalign case shipments of 32.8% year over year to 236.1 thousand during the third quarter. This upside was backed by growth in North America and international regions. Also a 46.3% year-over-year surge in teenage cases across the board, reflecting a very strong summer teen season, contributed to the top-line growth.

Segments in Detail

Revenues at the Clear Aligner segment (88.7% of total revenue) soared 40.2% year over year to $341.6 million in the reported quarter, primarily driven by continued strong Invisalign case volume growth across all customer channels and geographical regions.

In the third quarter, Invisalign case shipments amounted to 236,065, up 32.8% year over year, aided by growth across all regions as well as the expansion of customer base. During the quarter, Align Technology Invisalign cases were shipped to 42,605 doctors worldwide, of which, 24,845 were from North America while 17,760 were from international regions.

Revenues from Scanner and Service (11.3%) improved significantly by 25% to $43.7 million.


Gross margin in the third quarter was up 82 basis points (bps) year over year to 75.9% on a 33.7% rise in cost of net revenue.

During the quarter, Align Technology witnessed a 33.8% year-over-year increase in selling, general and administrative expenses to $169.5 million and an 18.5% rise in research and development (R&D) expenses to $24.2 million. The operating margin, however, expanded 335 bps to 25.6%.

Financial Details

Align Technology exited the third quarter with cash and cash equivalents and short-term marketable securities of $679.1 million, which marked a 12.8% rise from the preceding quarter.

In the reported quarter, Align Technology closed its earlier-announced $50 million accelerated stock repurchase program (ASR) receiving a total of 0.4 million shares at a weighted average share price of $146.48. Management currently has $250 million available for repurchase under the existing stock repurchase authorization.


For the fourth quarter of 2017, the company projects EPS of 92-95 cents on revenues of $391-$398 million. The company also expects Invisalign case shipments in the band of 245,000- 250,000, up 29-32% over the same period a year ago.

Our Take

Align Technology ended the third quarter on a solid note with both earnings and revenues beating the Zacks Consensus Estimate. We are upbeat about the continued strong Invisalign volumes. An extremely strong summer teen season drove the company’s Invisalign growth within the global teen market.

Within Scanners and Service, the company witnessed a nice uptake of iTero scanners by GP dentists. With record contracts coming from the GP summit last September, the company expects this bullish trend to continue for the rest of 2017. Align is also looking forward to its recently-inked distribution agreement with Patterson Dental for Align’s iTero Element intraoral scanning system.

Additionally, the company has a strong cash balance that enables it to carry out share repurchase programs and in turn provide solid returns to its investors.

On the flip side, the company is exposed to foreign exchange fluctuations, seasonal demand fluctuations, higher operating expenses pertaining to an increased head count along with higher investments targeted toward growth acceleration in geographical expansion and portfolio extension.

Zacks Rank & Key Picks

Currently, Align Technology carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader medical sector are PetMed Express, Inc. PETS, Abbott ABT and Intuitive Surgical, Inc. ISRG. Notably, PetMed sports a Zacks Rank #1 (Strong Buy), while Abbott and Intuitive Surgical carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

PetMed reported EPS of 43 cents for the second quarter of fiscal 2018, up 79.2% from the year-ago quarter’s 24 cents. Also, gross margin expanded 548 bps year over year to 35.2% in the reported quarter.

Abbott reported third-quarter 2017 adjusted earnings from continuing operations of 66 cents per share, up 11.9% year over year. Also, third-quarter worldwide sales came in at $6.83 billion, up 28.8% year over year. 

Intuitive Surgical posted adjusted earnings of $2.77 per share in the third quarter of 2017, up 34.5% on a year-over-year basis. Also, revenues rallied 18% year over year to $806.1 million.

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