Stable yet sluggish domestic demand could impact dental stocks – Baird (NASDAQ:PDCO)


The domestic dental market is stable, yet sluggish, according to a recent survey of dentists by Baird.

“Few if any of our industry contacts sound encouraged at the moment and leading indicators in this survey are troubling, all of which leaves us cautious across our dental coverage for now,” the Baird team wrote.

The August survey found that patient volumes declined 1.9% year over year, but still 5.9% less than pre-COVID volumes. The firm added that new patient volumes also appeared to soften.

On the dental equipment front, Baird said it is encouraged by recent comments from Henry Schein (NASDAQ:HSIC) and Patterson Companies (NASDAQ:PDCO) on demand trends.

Earlier in August, UBS upgraded Henry Schein (HSIC), citing the company’s potential to increase margins.

Seeking Alpha’s Quant Rating views Henry Schein (HSIC) as a hold. In June, Baird analyst Jeff Johnson downgraded the company to neutral from outperform with an $88 price target (~16% upside based on Friday’s close). He still has that price target but has removed his rating on the stock.

In its recent Q4 fiscal 2022 results, Patterson (PDCO) beat on the top and bottom lines. Seeking Alpha contributor JP Research recently made a bullish case for the company. Johnson has a $35 price target (~19% upside based on Friday’s close).

He has a $41 price target for Dentsply Sirona (NASDAQ:XRAY) (~15% upside based on Friday’s close). William Blair recently downgraded Dentsply Sirona to underperform from market perform citing an internal investigation on the use of incentives to sell products to distributors.

Among dental stocks, Baird only has an overweight rating for Align Technology (NASDAQ:ALGN), the maker of Invisalign clear aligners. It has a $410 price target (~50% upside based on Friday’s close).

In late July, Align (ALGN) drew a double downgrade to sell from buy from Goldman Sachs following the company’s Q2 2022 results. Seeking Alpha’s Quant Rating views Align (ALGN) as a strong sell.


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