Dentsply Sirona's 2Q Results Show Continued Success in Restructuring Execution

Dentsply Sirona released second-quarter earnings that fell largely in line with our expectations. Revenue declined 3% on a GAAP basis but saw an increase of 3% on an internal growth basis, with the 600-basis-point discrepancy largely attributable to foreign-exchange headwinds and products that were discontinued as a result of the restructuring program. We do not expect any material change to our $40 fair value estimate, and our no-moat rating is intact. Echoing our view from last quarter, we believe Dentsply’s restructuring program continues to benefit the firm, as evidenced by its adjusted gross margin and operating margin increases of approximately 1% and 3%, respectively. We believe the successful implementation of large cost-cutting measures is pivotal to Dentsply’s success in the increasingly competitive dental distribution market. With the previously announced CFO transition underway after former Cardinal Health executive Jorge Gomez was appointed to the role in July, we'll be paying even closer attention to the results of these ongoing implementation efforts.