Company Reports

No-moat Dentsply Sirona announced on Aug. 20 that CFO Glenn Coleman will resign as of Nov. 7 to join another firm. Coleman joined Dentsply in September 2022 and helped the firm navigate the volatile covid and post-covid marketplace. News of his departure comes as a surprise; the timing seems unfavorable for Dentsply, which has recently been challenged by turbulent consumer sentiment and a tough macro environment. The stock is currently trading about 5% below the Aug. 19 close, which we think is driven by this abrupt announcement. As we wrote in the latest earnings note, we expect the second half of the year to see headwinds in price and volume across geographies as the difficult environment is likely to persist. We think a search for a new CFO on top of everything else is likely to raise concerns among investors.

No-moat Dentsply Sirona reported tepid second-quarter earnings that came in below our expectations. Total sales of $984 million were down 4.3% as the challenging macroenvironment, foreign exchange headwinds and unfavorable product mix weighed down sales. While three of four segments delivered positive organic growth, connected technology solutions plunged over 18% on a reported basis and more than offset these gains. Despite launching the lower-priced and legacy brand Orthophos SL in Europe last quarter to combat marketwide pressures and competition headwinds, imaging equipment still suffered. The challenged top line flowed down to impact profitability, and poor product mix, volume challenges, and pricing weighed down margins. While we still expect a tough environment in the second half of the year across geographies, management noted some improvement in customer surveys from key markets like Germany, so we are slightly encouraged by this.

Dentsply Sirona is one of the world’s largest manufacturers of dental equipment and supplies. It has a strong presence in dental CAD/CAM (computer-aided design/computer-aided manufacturing) and has long reaped the benefits as a first-mover in the space. However lucrative economics and rising appetite for cosmetic procedures has attracted a large number of competitors over the last decade and put the company on a defensive footing. To adopt and compete in an increasingly fragmented market, Dentsply Sirona has invested more into its CEREC system, the firm’s flagship chairside workflow solutions. Since 2019, it has launched a new scanner, milling machine, 3D printer, as well as a new cloud solution that integrates different parts of the workflow together. The firm also recently expanded its partnership with 3Shape, an intraoral scanner and dental CAD/CAM software manufacturer, by allowing scans from 3Shape’s Trios scanner to be integrated with Dentsply Sirona’s workflow. We appreciate this strategic move because CEREC has historically been a closed system and we believe opening up its workflow could expand Dentsply Sirona’s end markets and allow doctors who use third-party equipment to adopt the firm’s offerings more easily.

No-moat Dentsply Sirona reported first-quarter earnings that came in slightly below our expectations. Total sales of $953 million were down 2.6% year over year, as underlying market demand and patient flow remain dampened. Management lightly trimmed its full-year sales guidance by $50 million and called for full-year adjusted EPS to land on the low end of the previous range. Having said that, we are maintaining our $27 per share fair value estimate, as minor adjustments to our near-term assumptions were offset by the time value of money.

Dentsply Sirona is one of the world’s largest manufacturers of dental equipment and supplies. It has a strong presence in dental CAD/CAM (computer-aided design/computer-aided manufacturing) and has long reaped the benefits as a first-mover in the space. However lucrative economics and rising appetite for cosmetic procedures has attracted a large number of competitors over the last decade and put the company on a defensive footing. To adopt and compete in an increasingly fragmented market, Dentsply Sirona has invested more into its CEREC system, the firm’s flagship chairside workflow solutions. Since 2019, it has launched a new scanner, milling machine, 3D printer, as well as a new cloud solution that integrates different parts of the workflow together. The firm also recently expanded its partnership with 3Shape, an intraoral scanner and dental CAD/CAM software manufacturer, by allowing scans from 3Shape’s Trios scanner to be integrated with Dentsply Sirona’s workflow. We appreciate this strategic move because CEREC has historically been a closed system and we believe opening up its workflow could expand Dentsply Sirona’s end markets and allow doctors who use third-party equipment to adopt the firm’s offerings more easily.

No-moat Dentsply Sirona reported fourth-quarter earnings slightly better than our expectations. Total sales of $1.0 billion was up 2.9% year over year. We maintain our fair value estimate of $27 per share as adjustments to our model were too minor to affect the valuation.

Dentsply Sirona is one of the world’s largest manufacturers of dental equipment and supplies. It has a strong presence in dental CAD/CAM (computer-aided design/computer-aided manufacturing) and has long reaped the benefits as a first-mover in the space. However lucrative economics and rising appetite for cosmetic procedures has attracted a large number of competitors over the last decade and put the company on a defensive footing. To adopt and compete in an increasingly fragmented market, Dentsply Sirona has invested more into its CEREC system, the firm’s flagship chairside workflow solutions. Since 2019, it has launched a new scanner, milling machine, 3D printer, as well as a new cloud solution that integrates different parts of the workflow together. The firm also recently expanded its partnership with 3Shape, an intraoral scanner and dental CAD/CAM software manufacturer, by allowing scans from 3Shape’s Trios scanner to be integrated with Dentsply Sirona’s workflow. We appreciate this strategic move because CEREC has historically been a closed system and we believe opening up its workflow could expand Dentsply Sirona’s end markets and allow doctors who use third-party equipment to adopt the firm’s offerings more easily.

No-moat Dentsply Sirona reported third-quarter earnings that were below our expectations. Total sales were flat year over year as a growth in the rest of world markets, such as China, was offset by weak performance from the U.S. and key markets in Europe. Management also pulled back its full-year guidance for top and bottom lines, as the overall trend in dentistry looks challenging. Decreasing patient flow, high cancellations, and poor consumer sentiment are all likely to take a toll on growth. After slightly trimming our forecasts for next quarter and first half of 2024, we lower our fair value estimate to $27 from $28.

We peg Dentsply Sirona's fair value estimate at $28 per share. Our model is underpinned by a 5-year sales CAGR of 3.5% with moderate year-over-year margin expansion and a no-moat rating.

Dentsply Sirona is one of the world’s largest manufacturers of dental equipment and supplies. It has a strong presence in dental CAD/CAM (computer-aided design/computer-aided manufacturing) and has long reaped the benefits as a first-mover in the space. However lucrative economics and rising appetite for cosmetic procedures has attracted a large number of competitors over the last decade and put the company on a defensive footing. To adopt and compete in an increasingly fragmented market, Dentsply Sirona has invested more into its CEREC system, the firm’s flagship chairside workflow solutions. Since 2019, it has launched a new scanner, milling machine, 3D printer, as well as a new cloud solution that integrates different parts of the workflow together. The firm also recently expanded its partnership with 3Shape, an intraoral scanner and dental CAD/CAM software manufacturer, by allowing scans from 3Shape’s Trios scanner to be integrated with Dentsply Sirona’s workflow. We appreciate this strategic move because CEREC has historically been a closed system and we believe opening up its workflow could expand Dentsply Sirona’s end markets and allow doctors who use third-party equipment to adopt the firm’s offerings more easily.

We are dropping coverage of Dentsply. We provide broad coverage of more than 1,500 companies globally and periodically adjust our coverage according to investor interest and staffing.

We are placing Dentsply under review as we evaluate analyst stock coverage decisions. As a reminder, we provide broad coverage of more than 1,500 companies globally and periodically adjust our coverage according to investor interest and staffing.

Dentsply Sirona is a leading dental equipment and supply manufacturer with a large portfolio. The attractive economics and rising importance of cosmetic procedures has attracted a large number of competitors and has put the company on a defensive footing. A significant portion of Dentsply Sirona’s portfolio consists of consumables products with strength in the specialty markets of endodontics, orthodontics, and implants, along with its expertise in CAD/CAM equipment. Most of its customers rely on the company to provide reliable products and training/support, which has provided some customer stickiness. However, the recent surge in competitors continues to pressure overall growth and operating margin.

Dentsply Sirona reported fourth-quarter results that reflected a notable stabilization in its business. Improving core results and management’s positive 2021 outlook provided a boost to the shares, which traded 13% higher on March 1. The business had struggled through the pandemic, and its recovery has been slower than peers'; this was probably exacerbated by the company's restructuring efforts, which started before the pandemic, and its largely commodity portfolio. We do not anticipate a material change to our $40 value estimate for no-moat Dentsply.

While the 9% year-over-year organic sales decline Dentsply Sirona reported in its third quarter would ordinarily not offer respite for investors, the COVID-19 pandemic’s extraordinary impact on the company last quarter, in which it experienced an over 50% revenue decline, paints the company’s poor performance this quarter in a relatively positive light. Despite the relative sequential improvement, the company’s recovery seems to be notably slower than the other dental companies under coverage. Management continues to stand by its decision to refrain from providing any guidance for the remainder of the year, citing pandemic-related uncertainty. We do not anticipate the company to realize a material recovery in the near term and maintain our $40 per share fair value estimate for no-moat Dentsply.

No-moat Dentsply Sirona reported second-quarter revenue of $491 million, a more than 50% year-over-year decline. The weak top line was largely attributable to the widespread government and voluntary dental office closures with the coronavirus pandemic. Although management saw positive trends emerge at the beginning of June and full recovery into July, they were not confident enough to extrapolate and instead pulled guidance in light of the volatility. Additionally, Dentsply’s operating margin was down $104 million, or 21% of sales, a stark contrast to the $68 million or 6.7% margin last year. We had baked in a substantial negative impact from the pandemic before the update and maintain our current fair value estimate of $40 with a high uncertainty rating with the undetermined timing of the rollback of mandatory and voluntary closures and the execution of the company’s aggressive restructuring plan.

No-moat Dentsply reported first-quarter revenue of $874 million, representing a 4% year-over-year organic decline and we are maintaining a no-moat rating and fair value estimate of $40. Double-digit organic consumable revenue declined 15% and were partially offset by the 5% organic growth of the technology & equipment segment with strength in digital dentistry and supplemented new products, Prime Scan and Primemill. The revenue shortfall and the $199 non-cash impairment of the equipment and instruments segment resulted in lower profitability and a GAAP operating loss of $140 million.

Dentsply Sirona is a leader in the dental market and has a large dental portfolio. Although the company had initially established itself as a leader in the market, the attractive economics and rising importance of cosmetic procedures has attracted a large number of competitors and has put the company on a defensive footing. Although a significant portion of Dentsply Sirona’s portfolio consists of consumables products, the company has historically been able to fall back on its strength in the specialty markets of endodontics, orthodontics, and implants, along with its expertise in CAD/CAM equipment. Most of its customers rely on the company to provide reliable products and training/support, which has provided some customer stickiness. However, the recent surge in competitors continues to pressure overall growth and operating margin.

Dentsply Sirona reported solid fourth-quarter and full-year results with organic revenue growth of 8.4% and 5.7%, respectively. Additionally, Dentsply was able to achieve operating margin expansion of approximately 300 basis points because of its streamlined restructuring plan, in which the company made strides by ending several of its imaging partnerships, selling its surgical line, and exiting the 1-800-Dentist business, which provided prescreened new patient leads for dental practices. We think these tangible steps elucidate management’s commitment to executing on its multiyear plan, which should allow it to focus on more-profitable segments and targeted innovation. This being noted, we do not think this cost-cutting strategy is substantial enough for the company to become the clear low-cost provider for dental practices, which continue to consolidate and leverage their group purchasing power through the proliferation of dental service organization. Accordingly, we are affirming our long-term view that Dentsply does not possess a sustainable competitive advantage to support a moat because of its focus on commoditylike consumables and relatively undifferentiated technology offerings and, accordingly, we are maintaining our fair value estimate of $40 per share.

Dentsply Sirona is one of the leading players in the dental market thanks to its product breadth and long history of innovation and acquisitions. An aging population, the rising importance of cosmetic procedures, and a growing emerging-market middle class support growth opportunities but have also attracted more competition and puts the firm on a defensive footing.