Align Technology (NASDAQ:ALGN) returned to investors' good graces in October with its strong third-quarter results. After warning about potential headwinds and lowering its guidance, Align blew past expectations. But that's the past.

The orthodontic device maker announced its 2019 fourth-quarter and full-year results after the market closed on Wednesday. Although those results were great, they were overshadowed by concerns about the potential impact of the coronavirus that first affected China and has now spread to other countries. Here are the highlights from the company's Q4 update.

Hand holding a clear dental aligner

Image source: Getty Images.

Good news

There was plenty of good news with Align's fourth-quarter results. The company reported fourth-quarter revenue of $649.8 million, reflecting a 21.7% year-over-year increase. It also topped the consensus Wall Street Q4 revenue estimate of $646.5 million.

Align announced diluted earnings per share (EPS) of $1.53, up 27.5% over the prior-year period result. The average analysts' estimate was for EPS of $1.40.

The company's strength in Q4 was evident across the board. Invisalign volume jumped 23.9% year over year to 413,725 case shipments. This reflected 19.3% growth in the Americas and 30.1% growth in international markets. Align made impressive progress in the teen market, with Invisalign shipments rising 33.1% year over year.

Align's scanners and services segment also performed very well, with sales increasing by 20.2% year over year. The company said it saw especially strong growth internationally.

Bad news

Normally, trouncing Wall Street's revenue and earnings estimates would please investors. However, investing in stocks requires a focus on the future instead of dwelling on successes of the past. And Align's future appears a little murky.

Align set its sights lower than expected for the first quarter of 2020. The company anticipates net revenue between $615 million and $630 million, significantly below the consensus analysts' estimate of $657.3 million. It projects adjusted diluted EPS between $1.19 and $1.28, lower than the average analysts' estimate of $1.44.

The problem is China. Align reduced its 2020 Q1 outlook because of concerns about the impact of the coronavirus outbreak in the country. China represents close to 8% of the company's total revenue. The large country has implemented travel bans in some areas and has issued public warnings about avoiding nonessential medical and dental procedures.

Align has taken steps of its own in response to the coronavirus outbreak. CEO Joe Hogan stated:

As we kick off 2020, we are very concerned for the safety and health of our employees, customers/doctors and their patients in China.  Their wellbeing is our top priority and we are doing everything we can to ensure that they are in good hands. We are working with our local team to donate medical supplies and provide funding to help combat the outbreak.  

The net impact of the coronavirus concerns is that Align expects $30 million to $35 million less revenue for its Invisalign and iTero scanners in China in the first quarter. The company also said that it's "absorbing $3.0 million to $4.0 million in idle China plant capacity costs which we expect will result in approximately a 0.5% gross margin impact."

Looking ahead

Despite the bad news related to the financial hit that Align could take from the coronavirus scare, the long-term prospects of the company appear to remain quite good. Hogan said that "it's important to take a step back and remember that our business is broad and deep." He's right.

The impact of the coronavirus concerns should only be temporary. Align's performance in Q4 shows that overall demand remains very strong for its Invisalign clear aligners and for its iTero scanners.