Fed Governor Adriana Kugler to resign
Investing.com -- On March 18, 2025, Moody’s Ratings altered the outlook for Dentsply Sirona Inc. to negative from stable, while affirming the company’s Baa2 issuer rating, Baa2 senior unsecured rating, and Prime-2 commercial paper rating.
The revision to a negative outlook is based on Moody’s expectation that Dentsply Sirona will continue to encounter growth challenges and earnings uncertainty. This could make the company’s credit metrics and ratings vulnerable to any negative developments in the dental sector. Dentsply Sirona’s performance in 2024 did not meet Moody’s expectations, mainly due to weak sales in high dollar equipment such as CAD/CAM and imaging products. Sales of larger capital-equipment, which often require financing, have declined partly because of persistently high interest rates. The volume of patients opting for expensive full-arch protheses, which require multiple implants, has also decreased, impacting sales of premium implants. Despite these challenges, the growth outlook for orthodontics and day-to-day consumables used in general dentistry is still favorable.
Moody’s affirmation of the Baa2 ratings reflects its belief that Dentsply Sirona’s earnings growth potential remains intact in the long term, supported by a favorable outlook for dental industry growth and the company’s leading market position across a wide range of dental products. Moody’s noted that the company remains committed to financial policies that support an investment grade rating and is taking actions to reduce business costs. Dentsply Sirona’s free cash flow remains strong, and a moderately strong cash balance provides the company with flexibility for debt repayment. Any improvement in sales in higher-dollar segments, including CAD/CAM, imaging equipment, and premium implants due to pent-up demand, could alleviate the negative pressure.
Dentsply Sirona’s Baa2 rating reflects its leadership position in the global dental products markets, a balanced business mix between larger-ticket equipment sales and recurring sales of consumable dental products, and significant geographic diversification. Moody’s expects the company’s leverage to remain stable in the mid 3x times range on a Moody’s adjusted debt/EBITDA over the next 12 to 18 months.
However, the company is limited by cyclical demand for dental products, which have a high element of self-pay. The company’s large-ticket capital equipment segment will continue to face some challenges from high interest rates and macroeconomic concerns.
Moody’s expects liquidity to remain very good with $272 million of cash on hand and an undrawn $700 million revolver as of December 31, 2024. The revolver is a backstop for the CP program, with $410 million outstanding. Free cash flow remains strong at $160 million as of the LTM period ending December 31, 2024. All of the company’s debt are unsecured.
The rating could be upgraded if the company significantly improves its earnings and margins through restoring sales growth of its high dollar equipment segment including CAD/CAM and other equipment business lines, which have performed poorly in recent quarters. The company also needs to demonstrate a commitment to maintaining moderate leverage by reducing and sustaining debt/EBITDA below 2.25x.
The rating could be downgraded if the company does not materially improve its earnings and quickly reduce leverage from its elevated levels. A downgrade could also occur if the company exhibits increasingly aggressive financial policies. Quantitatively, debt to EBITDA sustained above 3.0x could lead to a downgrade.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.