Downturn in Dental Cosmetic Procedures
Dental-supply companies may have less reason to smile in 2008. Dentists are seeing less patient traffic, according to nearly 250 dentists and dental specialists surveyed in late March and early April. "Cancellations are up, and no-shows are up," said Robert W. Baird & Co. analyst Jeff Johnson. And patients who do keep their appointments are less willing to pay for pricey restorative and cosmetic work.
"Recession, the housing mess and ever-increasing gas and food costs are taking a toll on families wanting to start a two-year ortho treatment," said one orthodontist in his survey response.
As a result, demand for consumable products, like sealants and impression materials, is slowing. So is demand for high-end dental equipment, although Johnson notes new business tax incentives may bolster spending late this year. Johnson has downgraded Dentsply International (ticker: XRAY) and Patterson Cos. (PDCO) to "neutral" from "outperform." But he rates Henry Schein (HSIC) "outperform" based on its equipment business.
Johnson plans to watch unemployment rates. "Dental demand is tied closely to dental benefits, and benefits are tied to jobs," he said. Banc of America Securities analyst Brandon Couillard is less worried. "Dental suppliers can weather some slowness in the U.S," he said