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3 Dental Supplies Stocks to Buy as Industry Prospects Recover
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Several players in the Zacks Medical - Dental Supplies industry witnessed a substantial recovery in 2022 as the effects of the COVID-19 crisis eased. Sales of dental products and services rebounded primarily owing to the relaxation of prior restrictions and mass vaccinations. Meanwhile, increasing burden of oral diseases and an aging population, growing demand for cosmetic dentistry and technological advancements in dentistry are driving the market forward. The market is expected to continue to grow as the dental industry evolves and new treatments and procedures are developed to meet the changing needs of patients. Going by Fortune Business Insight data, the global dental industry is expected to reach $63.93 billion by 2029, seeing a compound annual growth rate of 7.4% from 2022.
However, inflationary, labor-shortage and supply-chain headwinds are hurting the margins of the industry players. These headwinds are likely to continue in 2023, subduing earnings growth. Industry participants like West Pharmaceutical Services (WST - Free Report) , The Cooper Companies (COO - Free Report) and Henry Schein (HSIC - Free Report) have shown resiliency despite uncertain conditions and are likely to gain from the existing opportunities.
Industry Description
This industry primarily comprises designers, developers, manufacturers and marketers of dental consumables, dental laboratory products and dental specialty items. Some of the industry participants also provide practice management and clinical software, patient education systems, and office forms and stationery. Dental stocks have been gaining significant attention post the weakness witnessed during the pandemic-induced disruptions. This space has continued to show signs of recovery and held its ground. Notably, dental care is being delivered safely, following the guidance and recommendations of the American Dental Association and CDC. Backed by the rebound witnessed by companies in this space, patient volume continues to see an encouraging increase despite the COVID-19 uncertainty.
Major Trends Shaping the Future of the Medical Dental Supplies Industry
Increasing Burden of Oral Diseases and Aging Population: The dental equipment market in the United States is being driven by the country's growing geriatric population. This group is a significant demographic in dental surgeries and other dental practices. The United States Census Bureau reported that in 2020, the country had 54.1 million people aged 65 and over. With aging comes an increase in dental issues such as cavities, root and coronal caries, and periodontitis. Consequently, the rising number of seniors in the country is a key factor fueling the growth of the dental equipment market.
Demand for Aesthetic and Cosmetic Dentistry: The demand for aesthetic and cosmetic dentistry is driving the dental equipment market in the United States. Influenced by Internet strategies, current trends, and media coverage, people are increasingly interested in dental aesthetics. Cosmetic dentistry, which originated in the United States, has been the driving force behind many advancements in the field. Patients in the country are increasingly seeking dental procedures that improve the aesthetics of their smile, as well as restore function. This trend is fueling the growth of the dental equipment market in the United States.
Technological Advancements: New technologies such as digital imaging, laser dentistry, and CAD/CAM systems are transforming the way dental procedures are performed. These technologies offer more precise and efficient treatments, resulting in better outcomes for patients. Additionally, innovations in materials science have resulted in the development of new materials that are more durable, biocompatible, and aesthetically pleasing, expanding the range of dental supplies available to dental practitioners.
Zacks Industry Rank
The Zacks Medical Dental Supplies industry falls within the broader Zacks Medical sector.
It carries a Zacks Industry Rank #106, which places it in the top 43% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all member stocks, indicates bright near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
Before we present a few dental supply stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.
Industry Performance
The industry has outperformed its sector as well as the S&P 500 composite in the past year.
Stocks in this industry have collectively gained 4.4% against the Zacks Medical sector’s decline of 8.8%. The S&P 500 has fallen 3% in the same time frame.
One-Year Price Performance
Industry's Current Valuation
On the basis of the forward 12-month price-to-earnings (P/E) ratio, which is commonly used for valuing medical stocks, the industry is currently trading at 18.7X compared with the S&P 500’s 18.25X and the sector’s 23.12X.
Over the last five years, the industry has traded as high as 20.1X and as low as 13.31X, with the median being 17.6X, as the charts below show.
Price-to-Earnings Forward Twelve Months (F12M)
Price-to-Earnings Forward Twelve Months (F12M)
3 Promising Dental Supply Stocks
West Pharmaceutical Services: It is a leading global manufacturer with respect to the design and production of technologically advanced, high-quality, integrated containment and delivery systems for injectable drugs and healthcare products. West Pharmaceutical operates through two segments – Proprietary Products and Contract-Manufactured Products. The Proprietary Products segment provides packaging, containment and drug delivery products, together with analytical lab services and other integrated services and solutions mainly to biologic, generic and pharmaceutical drug customers. The Contract-Manufactured Products segment acts as a fully-integrated business, which remains committed toward the design, manufacture and automated assembly of complex devices.
Continued strong demand for WST’s NovaPure, Envision and Westar products fueled top-line growth in the fourth quarter of 2022. The Biologics and Generics market units demonstrated robust organic growth during the quarter. Moreover, the Pharma market unit also contributed to overall organic growth.
The company projects adjusted EPS of $7.25-$7.40 for 2023.
For this Exton, PA-based company, the Zacks Consensus Estimate for fiscal 2023 revenues suggests growth of 2% from the year-ago reported figure, while the same for earnings indicates a decrease of 13.5%. It has a trailing four-quarter earnings surprise of 10.35%, on average. Presently, the company carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Price and Consensus: WST
The Cooper Companies: It is a specialty medical device company operating on a global basis. Cooper has two business segments — CooperVision and CooperSurgical. While CooperVision manufactures and sells a wide range of contact lenses, CooperSurgical sells a variety of medical devices and surgical instruments. Per management, myopia management continues to see strong momentum during the fourth quarter. Cooper Companies is progressing well through inorganic expansion. It has expanded its products and services portfolio through multiple acquisitions over the last few years.
The Cooper Companies’ top line gained 9.1% in the last reported quarter. It also beat the Zacks Consensus Estimate by 2.9%. Strong revenue growth across all its segments and geographies was partially offset by an unfavorable currency movement. The company expects total revenue growth of 7-9% for fiscal 2023 and adjusted earnings growth of 1-4%.
For this Pleasanton, CA-based company, the Zacks Consensus Estimate for fiscal 2023 revenues and earnings suggests increases of 6.6% and 2.5%, respectively. Currently, the company carries a Zacks Rank of 2.
Price and Consensus: COO
Henry Schein: It is a leading distributor of health care products and services across the globe. The company serves office-based dental, medical and animal health practitioners, dental laboratories, government as well as institutional health care clinics and other alternate-care sites. Additionally, Henry Schein offers other value-added services such as practice management software, e-commerce solutions and an array of financial services. Henry Schein boasts a wide global footprint with 61 distribution centers. Apart from North America and Canada, the company has a presence in Australia and New Zealand as well as in emerging nations like China, Brazil, Israel, the Czech Republic and Poland. We believe Henry Schein’s worldwide reach offers it a major competitive advantage over other players in the healthcare distribution industry.
In the fourth quarter of 2022, Henry Schein performed well. Growth in the Technology and Value-added Services business was strongest in the international business during the fourth quarter, banking on the strength of the Dentally cloud-based solution. Growth in North America was driven by sales of practice management software. Sales growth in the Medical business continued to be robust, reflecting higher patient traffic to alternate care sites. Widespread network and channel mix and favorable long-term trends in the dental business are likely to drive future growth. However, severe currency headwinds and lower sales of PPE and COVID-19 test kits are likely to continue to hurt the top line in 2023.
For this Melville, NT-based company, the Zacks Consensus Estimate for 2023 revenues and earnings suggests an increase of 1.5% and 10.6%, respectively. The estimate for earnings has improved 1.7% in the past 60 days. It has a trailing four-quarter earnings surprise of 2.97%, on average. Currently, the company carries a Zacks Rank of 2.
Price and Consensus: HSIC
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3 Dental Supplies Stocks to Buy as Industry Prospects Recover
Several players in the Zacks Medical - Dental Supplies industry witnessed a substantial recovery in 2022 as the effects of the COVID-19 crisis eased. Sales of dental products and services rebounded primarily owing to the relaxation of prior restrictions and mass vaccinations. Meanwhile, increasing burden of oral diseases and an aging population, growing demand for cosmetic dentistry and technological advancements in dentistry are driving the market forward. The market is expected to continue to grow as the dental industry evolves and new treatments and procedures are developed to meet the changing needs of patients. Going by Fortune Business Insight data, the global dental industry is expected to reach $63.93 billion by 2029, seeing a compound annual growth rate of 7.4% from 2022.
However, inflationary, labor-shortage and supply-chain headwinds are hurting the margins of the industry players. These headwinds are likely to continue in 2023, subduing earnings growth. Industry participants like West Pharmaceutical Services (WST - Free Report) , The Cooper Companies (COO - Free Report) and Henry Schein (HSIC - Free Report) have shown resiliency despite uncertain conditions and are likely to gain from the existing opportunities.
Industry Description
This industry primarily comprises designers, developers, manufacturers and marketers of dental consumables, dental laboratory products and dental specialty items. Some of the industry participants also provide practice management and clinical software, patient education systems, and office forms and stationery. Dental stocks have been gaining significant attention post the weakness witnessed during the pandemic-induced disruptions. This space has continued to show signs of recovery and held its ground. Notably, dental care is being delivered safely, following the guidance and recommendations of the American Dental Association and CDC. Backed by the rebound witnessed by companies in this space, patient volume continues to see an encouraging increase despite the COVID-19 uncertainty.
Major Trends Shaping the Future of the Medical Dental Supplies Industry
Increasing Burden of Oral Diseases and Aging Population: The dental equipment market in the United States is being driven by the country's growing geriatric population. This group is a significant demographic in dental surgeries and other dental practices. The United States Census Bureau reported that in 2020, the country had 54.1 million people aged 65 and over. With aging comes an increase in dental issues such as cavities, root and coronal caries, and periodontitis. Consequently, the rising number of seniors in the country is a key factor fueling the growth of the dental equipment market.
Demand for Aesthetic and Cosmetic Dentistry: The demand for aesthetic and cosmetic dentistry is driving the dental equipment market in the United States. Influenced by Internet strategies, current trends, and media coverage, people are increasingly interested in dental aesthetics. Cosmetic dentistry, which originated in the United States, has been the driving force behind many advancements in the field. Patients in the country are increasingly seeking dental procedures that improve the aesthetics of their smile, as well as restore function. This trend is fueling the growth of the dental equipment market in the United States.
Technological Advancements: New technologies such as digital imaging, laser dentistry, and CAD/CAM systems are transforming the way dental procedures are performed. These technologies offer more precise and efficient treatments, resulting in better outcomes for patients. Additionally, innovations in materials science have resulted in the development of new materials that are more durable, biocompatible, and aesthetically pleasing, expanding the range of dental supplies available to dental practitioners.
Zacks Industry Rank
The Zacks Medical Dental Supplies industry falls within the broader Zacks Medical sector.
It carries a Zacks Industry Rank #106, which places it in the top 43% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all member stocks, indicates bright near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
Before we present a few dental supply stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.
Industry Performance
The industry has outperformed its sector as well as the S&P 500 composite in the past year.
Stocks in this industry have collectively gained 4.4% against the Zacks Medical sector’s decline of 8.8%. The S&P 500 has fallen 3% in the same time frame.
One-Year Price Performance
Industry's Current Valuation
On the basis of the forward 12-month price-to-earnings (P/E) ratio, which is commonly used for valuing medical stocks, the industry is currently trading at 18.7X compared with the S&P 500’s 18.25X and the sector’s 23.12X.
Over the last five years, the industry has traded as high as 20.1X and as low as 13.31X, with the median being 17.6X, as the charts below show.
Price-to-Earnings Forward Twelve Months (F12M)
Price-to-Earnings Forward Twelve Months (F12M)
3 Promising Dental Supply Stocks
West Pharmaceutical Services: It is a leading global manufacturer with respect to the design and production of technologically advanced, high-quality, integrated containment and delivery systems for injectable drugs and healthcare products. West Pharmaceutical operates through two segments – Proprietary Products and Contract-Manufactured Products. The Proprietary Products segment provides packaging, containment and drug delivery products, together with analytical lab services and other integrated services and solutions mainly to biologic, generic and pharmaceutical drug customers. The Contract-Manufactured Products segment acts as a fully-integrated business, which remains committed toward the design, manufacture and automated assembly of complex devices.
Continued strong demand for WST’s NovaPure, Envision and Westar products fueled top-line growth in the fourth quarter of 2022. The Biologics and Generics market units demonstrated robust organic growth during the quarter. Moreover, the Pharma market unit also contributed to overall organic growth.
The company projects adjusted EPS of $7.25-$7.40 for 2023.
For this Exton, PA-based company, the Zacks Consensus Estimate for fiscal 2023 revenues suggests growth of 2% from the year-ago reported figure, while the same for earnings indicates a decrease of 13.5%. It has a trailing four-quarter earnings surprise of 10.35%, on average. Presently, the company carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Price and Consensus: WST
The Cooper Companies: It is a specialty medical device company operating on a global basis. Cooper has two business segments — CooperVision and CooperSurgical. While CooperVision manufactures and sells a wide range of contact lenses, CooperSurgical sells a variety of medical devices and surgical instruments. Per management, myopia management continues to see strong momentum during the fourth quarter. Cooper Companies is progressing well through inorganic expansion. It has expanded its products and services portfolio through multiple acquisitions over the last few years.
The Cooper Companies’ top line gained 9.1% in the last reported quarter. It also beat the Zacks Consensus Estimate by 2.9%. Strong revenue growth across all its segments and geographies was partially offset by an unfavorable currency movement. The company expects total revenue growth of 7-9% for fiscal 2023 and adjusted earnings growth of 1-4%.
For this Pleasanton, CA-based company, the Zacks Consensus Estimate for fiscal 2023 revenues and earnings suggests increases of 6.6% and 2.5%, respectively. Currently, the company carries a Zacks Rank of 2.
Price and Consensus: COO
Henry Schein: It is a leading distributor of health care products and services across the globe. The company serves office-based dental, medical and animal health practitioners, dental laboratories, government as well as institutional health care clinics and other alternate-care sites. Additionally, Henry Schein offers other value-added services such as practice management software, e-commerce solutions and an array of financial services. Henry Schein boasts a wide global footprint with 61 distribution centers. Apart from North America and Canada, the company has a presence in Australia and New Zealand as well as in emerging nations like China, Brazil, Israel, the Czech Republic and Poland. We believe Henry Schein’s worldwide reach offers it a major competitive advantage over other players in the healthcare distribution industry.
In the fourth quarter of 2022, Henry Schein performed well. Growth in the Technology and Value-added Services business was strongest in the international business during the fourth quarter, banking on the strength of the Dentally cloud-based solution. Growth in North America was driven by sales of practice management software. Sales growth in the Medical business continued to be robust, reflecting higher patient traffic to alternate care sites. Widespread network and channel mix and favorable long-term trends in the dental business are likely to drive future growth. However, severe currency headwinds and lower sales of PPE and COVID-19 test kits are likely to continue to hurt the top line in 2023.
For this Melville, NT-based company, the Zacks Consensus Estimate for 2023 revenues and earnings suggests an increase of 1.5% and 10.6%, respectively. The estimate for earnings has improved 1.7% in the past 60 days. It has a trailing four-quarter earnings surprise of 2.97%, on average. Currently, the company carries a Zacks Rank of 2.
Price and Consensus: HSIC