For Immediate Release
Chicago, IL – December 13, 2024 – Today, Zacks Equity Research Becton, Dickinson and Co. BDX, or BD, McKesson MCK, Cardinal Health CAH and Merit Medical Systems MMSI.
Industry: Dental Supplies
Link: https://www.zacks.com/commentary/2382578/4-stocks-to-watch-amid-dental-supplies-industry-challenges
The Zacks Medical - Dental Supplies industry in the Medical sector has shown a consolidating trend in 2024 amid a rise in product sales. Although dental patient traffic remained stable during the third quarter, discretionary spending declined on higher-cost dental procedures, affecting consumables demand. Broader macroeconomic challenges like inflation and interest rates have constrained budgets for dental practices.
The pricing environment has stabilized, but it created a lag in this segment’s recovery. Per the Fortune Business Insight data, the global dental industry is expected to reach $95.37 billion at a CAGR of 11.8% in the 2023-2032 period. Industry participants like Becton, Dickinson and Co., or BD, McKesson, Cardinal Health and Merit Medical Systems have shown encouraging trends amid uncertain times and are likely to gain from the market opportunities.
Industry Description
The global dental industry consists of companies that design, develop, make and market dental products, such as consumables, laboratory products and specialty items. Some of these companies also offer software and systems for practice management, patient education and office administration. Dental stocks have been drawing attention amid a recovery in sales after the weakness faced due to the pandemic-induced disruptions. The market has been recovering and maintaining its position.
Notably, dental care is being provided based on the advice and recommendations of the American Dental Association and CDC. Thanks to the rebound seen by the companies in this space, patient volume has been increasing steadily despite the COVID-19 uncertainty.
Major Trends Shaping the Future of the Medical Dental Supplies Industry
Increasing Burden of Oral Diseases and an Aging Population: The dental equipment market in the United States is driven by the country's growing geriatric population. This group is a significant demographic in dental surgeries and other dental practices. Per the U.S. Census Bureau, the country had 55.8 million people aged 65 and above in 2020. Old age increases the likelihood of dental issues such as cavities, root and coronal caries, and periodontitis. Consequently, the rising number of seniors in the country is a key contributor to the market’s growth.
Demand for Esthetic and Cosmetic Dentistry: The dental equipment market in the United States is growing due to the demand for esthetic and cosmetic dentistry. People, influenced by Internet strategies, current trends and media coverage, want to improve their dental appearance. Cosmetic dentistry, which started in the United States, has led to many innovations in the field. Patients in the country are looking for procedures that can enhance their smile as well as restore dental function. This trend is boosting the growth of the U.S. dental equipment market.
Technological Advancements: Dental procedures are changing with new technologies like digital imaging, laser dentistry and CAD/CAM systems. These technologies make treatments more accurate and effective, leading to better results. Also, new materials have been developed that are stronger, more compatible and attractive, giving dental practitioners more options for supplies.
Zacks Industry Rank
The Zacks Medical Dental Supplies industry falls within the broader Zacks Medical sector.
It carries a Zacks Industry Rank #135, which places it in the bottom 46% of 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all member stocks, indicates dull near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform 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 underperformed its sector as well as the S&P 500 composite in the past year.
Stocks in this industry have collectively gained 4.2% compared with the Zacks Medical sector’s growth of 0.7%. The S&P 500 has soared 29.1% in the same time frame.
Industry's Current Valuation
On the basis of the forward 12-month price-to-earnings (P/E), which is commonly used for valuing medical stocks, the industry is currently trading at 17.3X compared with the S&P 500’s 22.6X and the sector’s 21.2X.
Over the past five years, the industry has traded as high as 20.9X and as low as 14.9X, with the median being 18.5X.
4 Promising Dental Supply Stocks
Cardinal Health is a nationwide drug distributor and provider of services to pharmacies, healthcare providers and manufacturers. The company continued to witness strong demand for its Pharmaceutical and Specialty solutions. CAH’s medical products and at-Home Solutions, Nuclear and Precision Health Solutions and OptiFreight Logistics are likely to support top-line growth.
The company signed two acquisition deals last month to accelerate its strategic growth areas and enhance patient care. CAH is likely to strengthen its multi-specialty business as the GI Alliance buyout is expected to operate as a platform within its Pharmaceutical and Specialty Solutions segment. The acquisition of Advanced Diabetes Supply Group is likely to boost CAH’s at-Home Solutions business.
Improvement in segmental profit looks promising. The expansion of gross margin also bodes well. However, sales are likely to be under pressure due to OptumRx contract expiration.
CAHexpects earnings per share (EPS) to be in the $7.75-$7.90 range for fiscal 2025, up from the prior outlook of $7.55-$7.70. Meanwhile, multiple acquisitions in 2024 buoy optimism as they are likely to boost the company's Specialty business and supply cutting-edge personnel, capabilities and technology that meet important demands for its customers and the business.
The Zacks Consensus Estimate for fiscal 2025 revenues indicates a decline of 3.5% from the year-ago reported figure, while the same for earnings implies an improvement of 3.9%. CAH has a trailing four-quarter average earnings surprise of 11.24%. It carries a Zacks Rank #2 (Buy) at present.
Merit Medical provides various peripheral and cardiac intervention products to cure cardiac conditions specific to interventional cardiology and electrophysiology. The company continues to see revenue growth in both its segments and across all product categories within its Cardiovascular unit. Robust performances in the United States and outside during the third quarter were impressive. The expansion of gross margin bodes well for the stock.
During the third quarter, Merit Medical completed the acquisition of certain assets from EndoGastric Solutions, Inc., which included the EsophyX Z+, and entered into an asset purchase agreement for the acquisition of the lead management portfolio of medical devices and certain related assets from Cook Medical Holdings LLC. MMSI also announced positive six-month findings from a pivotal trial relating to the Wrapsody Cell-Impermeable Endoprosthesis device, which is intended to extend long-term vessel patency in dialysis patients. These look promising for the stock.
In May, the company launched the basixSKY Inflation Device, which is available as a standalone product and in kits with Angioplasty Packs, further diversifying its product range. Additionally, it received FDA 510(k) clearance for the Siege Vascular Plug and introduced the Bearing nsPVA Express Prefilled Syringe in the United States and Australia.
It expects total revenue growth of 6.9-7.6% for 2024. MMSI projects sales at Cardiovascular segment and Endoscopy segment to grow 5.6-6.2% and 49-52%, respectively. Adjusted EPS for 2024 is now projected in the range of $3.33-$3.38, up from the earlier projection of $3.25-$3.34.
The Zacks Consensus Estimate for 2024 revenues indicates year-over-year growth of 7.2% and earnings estimates suggest an improvement of 11.6%. Currently, the company carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
BD: It is a medical technology company, engaged principally in the development, manufacture and sale of medical devices, instrument systems and reagents. Its operations consist of three business segments — BD Medical, BD Life Sciences and BD Interventional.
BD Medical produces a broad array of medical technologies and devices to help improve healthcare delivery in a wide range of settings. BD Life Sciences provides products for the safe collection and transport of diagnostics specimens, instruments and reagent systems to detect a broad range of infectious diseases, healthcare-associated infections and cancers. BD Interventional provides vascular, urology, oncology and surgical specialty products.
Solid top-line results for the fiscal third quarter, along with improvements in organic revenues and bottom-line performance, were impressive. Robust performance by all segments and regions (on an adjusted basis) was encouraging. BD’s domestic revenues were also up on a reported basis, while International revenues were up at CER. Strength in most of BD’s segments' business units during the reported quarter was also promising. The expansion of margins bodes well.
However, BD’s lower-than-expected revenues and lower International revenues on a reported basis were discouraging. The company expects adjusted EPS to be in the range of $13.05-$13.15 for fiscal 2025, implying a year-over-year improvement of 6.9-7.7%. Revenues are expected to grow 15-17% from the fiscal 2024 level.
For this Franklin Lakes, CA-based company, the Zacks Consensus Estimate for fiscal 2025 revenues indicates growth of 9.1% from the prior-year reported figure, while the same for earnings implies an increase of 9.8%. BD has a trailing four-quarter average earnings surprise of 6.24%. Presently, the company carries a Zacks Rank #3 (Hold).
McKesson: A healthcare services and information technology company, McKesson operates through two segments. The Distribution Solutions segment distributes branded and generic pharmaceutical drugs, along with other healthcare-related products worldwide.
The segment also provides practice management, technology, clinical support and business solutions to community-based oncology and other specialty practices. It offers specialty pharmaceutical solutions for pharmaceutical manufacturers as well. The Technology Solutions segment provides enterprise-wide clinical, patient care, financial, supply-chain and strategic management software solutions.
The company recorded a significant uptick in its overall top line during the first half of fiscal 2025. This growth was primarily driven by the U.S. Pharmaceutical segment, which saw increased prescription volumes, including higher volumes from specialty products, retail national account customers and GLP-1 medications. Investors seem to be optimistic regarding the updated earnings guidance.
On the second-quarter 2025earnings call McKesson raised its adjusted EPS guidance for the financial year. It now expects adjusted EPS to be in the range of $32.40-$33.00 (previously $31.75-$32.55), which represents growth of 18-20% from the prior-year level. Revenues are expected to grow 15-17% from the prior-year figure.
For this San Francisco, CA-based company, the Zacks Consensus Estimate for fiscal 2025 revenues indicates growth of 16.2% year over year, while the same for earnings implies an increase of 19.3%. McKesson has a trailing four-quarter average earnings surprise of 4.99%. Presently, the company carries a Zacks Rank of 3.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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Becton, Dickinson and Company (BDX) : Free Stock Analysis Report
Cardinal Health, Inc. (CAH) : Free Stock Analysis Report
McKesson Corporation (MCK) : Free Stock Analysis Report
Merit Medical Systems, Inc. (MMSI) : Free Stock Analysis Report
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