Align Technology stock falls on weak Q1 earnings forecast

Align Technology (ALGN) reported an 848.9% surge in earnings for the fourth quarter helped by the lower provision of income taxes as well as higher revenue. The results exceeded analysts’ expectations. However, the maker of the Invisalign tooth-straightening system guided first-quarter earnings below the consensus view. Following this, the stock inched down over 6% in the after-market session.

Net profit soared to $97.4 million or $1.20 per share from $10.3 million or $0.13 per share in the previous year quarter. The results reflect record revenues and volumes for both Invisalign and iTero across customer channels and country markets, and continued strength from teens, which grew 40.3%.

Net revenues jumped 26.7% to $534 million. Revenues from Invisalign clear aligners and SmileDirectClub aligners increased 22.4% and that from Scanner & Services climbed 54.8%.

Invisalign case shipments increased by 30.9% year-over-year to 333,800 cases with 21.7% growth coming from the Americas region and 45.3% from the International region.

Operating margin of 22.6% reflects higher doctor training and manufacturing costs, as well as higher legal fees than anticipated, partially offset by a sequential improvement in Invisalign average selling prices.

Looking ahead into the first quarter of 2019, the company expects net revenues in the range of $525 million to $535 million, up about 20% to 22% over last year. Invisalign case shipments are anticipated to be in the range of 340,000 to 345,000, up about 25% to 27% year-over-year. Earnings are predicted to be $0.78 to $0.84 per share and operating margin is projected to be 15.1% to 16.1% for the first quarter.

Also read: Align Technology Q4 2018 earnings call transcript

As of December 31, 2018, Align had $744.5 million in cash, cash equivalents and marketable securities compared to $761.5 million as of December 31, 2017. During the quarter, the company repurchased $50 million of its stock against stock buy-back authorizations and have $500 million still available for repurchase under the May 2018 repurchase program.

Shares of Align Technology ended Tuesday’s regular session up 0.24% at $222.03 on the Nasdaq. The stock has fallen over 19% in the past year and over 1% in the past three months.

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