Financial reports reflect slowing demand for dentistry

Confirming analyst predictions, three major dental supply companies' recently announced financial results show that they have been hit by a slowdown in the dental market.

The companies still registered growth, but some areas of the market slowed down compared to last year. In April Robert W. Baird analyst Jeff Johnson lowered the target stock prices of Dentsply, Patterson Dental, and Henry Schein based on a survey that showed the demand for dental care would hit a speed bump over the next few months. Following his projection, the stock prices of all three companies fell.

Johnson downgraded Dentsply's projected stock price to $42 from $48 last month. The stock value today is $40.59.

The market has softened in some speciality areas such as orthodontics and dental implants, William Jellison, chief financial officer and senior vice president of Dentsply, told DrBicuspid.com. The lab market and endodontics held up slightly better. The strongest market was consumables, which includes preventive and restorative care, he added.

However, even this market is weaker. "On the broader market indicators, what I refer to as the normal consumables, we believe the market has slowed slightly from the pace of late last year," said Bret W. Wise, chairman and CEO of Dentsply, at the company's financial results conference call.

Dentsply announced an internal growth rate of 4% in the U.S., compared to a higher growth rate of 8.5% in Europe and 6.3% in the rest of the world.

"Even though the dental market has slowed down slightly because of the overall economy, it is still more resilient than a lot of other harder-hit industries," Jellison said.

Johnson dropped Patterson Dental's projected stock price to $38 from $41. The stock price today is $33.66.

Patterson Dental fell short of analysts' revenue expectations of $800.5 million, coming in instead at $778.4 million.

"The overall conditions in the economy have only had a nominal effect on the company," Steve Armstrong, executive vice president and chief financial officer of Patterson Dental, told DrBicuspid.com. "Dental equipment is the most vulnerable category," he added.

For its latest quarter, Patterson Dental reported an increase of 5% in sales for consumable dental supplies, 1% for dental equipment and software, and 2% for other services and products, consisting primarily of technical service, parts and labor, software support services, and artificial teeth, compared to year earlier quarter.

"Sales of basic dental equipment were affected by lower-than-forecasted sales of digital radiography systems, including chair-side software and related computer hardware," James W. Wiltz, president and CEO of Patterson Dental, said in a press release.

Johnson dropped the projected price on Henry Schein's stock to $64 from $70. As of today, the stock price is $54.72.

The dental market has been affected by economic conditions to a minor extent, admitted Steven Paladino, executive vice president and chief financial officer of Henry Schein, at the company's financial results conference call.

"We believe that the dental marketplace is relatively resistant to macroeconomic trends but certainly not immune," Paladino said.

Henry Schein announced that internal dental consumable merchandise sales increased 4.3%, while dental equipment sales and service revenues were up 9.8%.

"We do believe that in certain high-priced procedures like implants, certain prosthetics, there is a bit of softness in the market," Paladino said. However, "we don't think it's dramatic. We think it's very modest."