Reasons to keep Envista stock in your portfolio for now

Envista Holdings CorporationNVST’s increase in Q3 2024 is supported by robust growth within the Specialty Products and Technologies division. Strategic acquisition deals look promising for growth. Meanwhile, a debt-ridden balance sheet and a dull macroeconomic environment continue to pose concerns for NVST’s business.

Over the past year, shares of this Zacks Rank #3 (Hold) company have lost 8.8%, versus the industry’s growth of 17.3%. The composite S&P 500 rose 30.8% over the same period.

The leading MedTech company has a market capitalization of $3.53 billion. Envista delivered an earnings surprise of 33.33% in Q3 2024.

Company specialized in products and technologies is growing: Envista’s Specialty Products & Technologies business is gaining momentum through the strategic development, manufacturing and marketing of dental implant systems, including regenerative solutions, dental prosthetics and associated treatment software and technologies, as well as orthodontic brace systems, aligners and laboratory products. The company mainly benefits from the growth within Spark production technology. Envista recognized that Spark was the fastest growing segment.

The company’s orthodontics business grew by mid-single digits in the third quarter, excluding Spark’s deferred revenue. The bracket and wire activities experienced robust growth in Russia and China. Moreover, the value implant business witnessed mid-single digit growth and an improving trend at Nobel.

Strategic acquisitions to stimulate growth: Envista’s growth strategy anticipates future acquisitions and continuously assesses potential acquisitions that strategically complement the company’s current portfolio or broaden it into new and lucrative economic sectors.

Envista recently acquired Osteogenics Biomedical, the developer of innovative regenerative solutions for periodontists, oral and maxillofacial surgeons and physicians involved in implant dentistry around the world.

During the third quarter, DEXIS (currently operating as part of the Envista Equipment and Consumables segment) introduced several new offerings, including a new CBCT platform, enhanced software for the DEXIS intraoral scanner and additional surgical functionality in the DTX treatment planning platform. Management remains confident that DEXIS will be a long-term growth driver for Envista.

Poor macroeconomic situation: Envista is experiencing deteriorating international trade, with global inflationary pressures creating a challenging environment in terms of raw material and labor costs, as well as freight costs and rising interest rates. In addition, Russia’s invasion of Ukraine and the global response to this invasion, including sanctions imposed by the United States and other countries, could harm the company’s overall business.

These challenging macroeconomic conditions result in a significant escalation in the company’s costs and expenses. During the third quarter of 2024, Envista’s SG&A expenses increased 5.1%. The company’s operating profit plummeted 75% year over year. Envista’s business was negatively impacted by the exit from lower priority and more price-sensitive geographic markets in the third quarter. Sales of the Specialty Product and Technology segment and the Equipment and Consumable segment declined 5.2% and 5.6% year-over-year, respectively.

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