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Align Technology (ALGN) Up 20.5% YTD: Will the Rally Continue?

Align Technology‘s ALGN shares have surged 20.5% year to date compared with the industry’s growth of 6.2%. The Medical sector has gained 3% in the said time frame. The company has a market capitalization of $24.80 billion.

This Zacks Rank #2 (Buy) stock is well-positioned to drive the digital revolution in the dental industry with Invisalign clear aligners, Itero Scanners and the Align digital platform. Its earnings are expected to grow 14.2% in the next year.

Will the Upside Continue?

The consensus estimate for 2024 revenues is pegged at $4.04 billion, indicating a year-over-year improvement of 4.6%. ALGN’s ROE for the trailing 12 months was 13.8%, better than the industry average of 11.1%.

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Align Technology is strategically capturing the growing malocclusion market, one of the most prevalent clinical dental conditions in the world. According to Align Technology’s May 2023 data, it is currently affecting approximately 60% to 75% of the global population. The company estimates that there are approximately 500 million people globally with malocclusion. However, most of them do not seek orthodontic treatment mainly due to negative perceptions of metal braces, affordability of treatment and accessibility to doctors in certain markets and geographies.

Till the end of 2023, the company achieved several major milestones, including 17 million Invisalign patients treated with 4.7 million teens. Total Invisalign Clear Aligner shipments for teens and younger patients reached a total of 809,000 cases, up 8% compared to 2022 and made up 34% of total Clear Aligner shipments.

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The company also performs digital treatment planning and interpretation for restorative cases worldwide, including in Costa Rica, China, Germany, Spain, Poland, and Japan, among others. Align Technology continues to expand its business through investments in resources, infrastructure and initiatives that help drive growth in Invisalign treatment, intraoral scanners and Exocad CAD/CAM software in existing and new international markets. According to the company, by establishing and expanding its key operational activities in locations closer to customers, it can address local and regional needs in a better way.

Lately, with iTero, in the fourth quarter of 2023, the company introduced an iTero Lumina inter-oral scanner with a smaller wand with unparalleled data capture capabilities for scanning by clinical members. The iTero Lumina inter-oral scanner is available now with orthodontic workflows and will be available in the second half of 2024 restorative workflows. According to the company, the use of iTero scanners for Invisalign case submissions continues to grow and remains a positive catalyst for Invisalign utilization.

Upbeat guidance also raises investors' optimism for the full year. ALGN anticipates revenues to be up in the mid-single digits in 2023. 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 first quarter of 2024, ALGN anticipates worldwide revenues in the range of $960-$980 million.

Estimate Trends

The Zacks Consensus Estimate for ALGN’s 2024 has moved from EPS of $9.26 to $9.39 in the past 90 days, reflecting analyst optimism.

Key Picks

Some other top-ranked stocks from the broader medical space are Stryker Corporation SYK, Cencora, Inc. COR and Cardinal Health CAH.

Stryker, carrying a Zacks Rank #2, reported a fourth-quarter 2023 adjusted EPS of $3.46, beating the Zacks Consensus Estimate by 5.8%. Revenues of $5.8 billion outpaced the consensus estimate by 3.8%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stryker has an estimated earnings growth rate of 11.5% for 2025 compared with the S&P 500’s 9.9%. The company’s earnings surpassed estimates in each of the trailing four quarters, the average being 5.1%.

Cencora, carrying a Zacks Rank #2, reported a first-quarter fiscal 2024 adjusted EPS of $3.28, which beat the Zacks Consensus Estimate by 14.7%. Revenues of $72.3 billion outpaced the Zacks Consensus Estimate by 5.1%.

COR has an earnings yield of 5.75% compared with the industry’s 1.85%. The company’s earnings surpassed estimates in each of the trailing four quarters, the average being 6.7%.

Cardinal Health, carrying a Zacks Rank #2, reported second-quarter fiscal 2024 adjusted earnings of $1.82, which beat the Zacks Consensus Estimate by 16.7%. Revenues of $57.45 billion improved 11.6% on a year-over-year basis and also topped the Zacks Consensus Estimate by 1.1%.

CAH has a long-term estimated earnings growth rate of 15.3% compared with the industry’s 11.8% growth. The company’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 15.6%.

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