Align Earnings: Weak Consumer Sentiment Doesn’t Slow Down Demand and Market Celebrates Stability

Narrow-moat Align Technology reported first-quarter earnings that were slightly higher than we expected. Total sales of $979 million were down 1.8% and the adjusted earnings per share was $2.13, down 0.6%. Case shipments delivered 6.2% growth and kicked off the year on very solid ground, but average selling price was down 8.1% against last year and 2.0% sequentially. Since Invisalign treatments are usually considered discretionary spending, we originally anticipated demand to be muted for the year against the backdrop of tariff uncertainty, tougher macro conditions, and weak consumer sentiment. Despite the overall sales slip during the quarter, we were encouraged to hear a positive tone around demand. Management guided to aligner shipment growth of mid-single digits for the full year (our estimate is 4%) and low-single-digit average sales price declines (we estimate a 1% decline). We ticked up our full-year assumptions slightly, but maintained our fair value estimate of $240 per share as our changes were immaterial. Shares are up about 11% afterhours upon on the positive news.