Chicago, IL – November 24, 2021 – Today, Zacks Equity Research discusses Dental Supply, including McKesson Corporation MCK, West Pharmaceutical Services Inc. WST and Cardinal Health Inc. CAH.
Link: https://www.zacks.com/commentary/1830689/3-promising-stocks-from-the-buoyant-dental-supplies-industry
The COVID-19 pandemic — a biological crisis of unprecedented nature — has altered the very nature and dynamics of the healthcare industry. The Zacks Medical - Dental Supplies industry bore the brunt of the closure of dental practices and lower patient visits due to the risk of exposure to the virus. However, the dental market has experienced substantial recovery, primarily owing to the easing of prior restrictions and mass vaccinations.
Apart from this, rising dependence on Artificial Intelligence (AI) & Robotics and teledentistry, and increase in number of patient visits are likely to help the industry thrive in the near term. Despite a pandemic-induced disruption triggered by the Delta variant, particularly in the months of August and September, the industry players have not shown signs of slowing down yet. Industry participants like McKesson Corp, West Pharmaceutical and Cardinal Health are likely to gain from the prospects prevalent.
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.
After a pandemic-battered 2020, the dental stocks are gaining substantial attention. The dental space exhibited signs of recovery from the second half of 2020 and continues to hold its ground. Notably, dental care is being delivered safely, following the guidance and recommendations of the American Dental Association (“ADA”) and CDC. Backed by the rebound witnessed by the companies in this space, patient volume continues to see an encouraging increase despite the resurgence in Delta variant cases.
Rising Dependence on Teledentistry: Following the COVID-19 outbreak, most of the dental practices were unable to offer routine services in the office. Teledentistry, which is a provision to offer dental services through interactive video, audio or other electronic media to provide consultation, diagnosis and treatment, helped clinicians and patients amid this crisis.
Dependence on teledentistry will continue to increase during the pandemic and beyond as it enhances patient care. Introduction of digital solutions have helped dental professionals to conduct video consultations with existing patients, thereby enhancing treatment efficiency.
Digital Influence: The latest technologies help dentists in carrying out minimally-invasive procedures that ensure precision and efficiency, thereby reducing patients’ trauma. The industry players actively promote digital workflows for general dentistry and dental specialties. Further, dental 3D printers are revolutionizing dentistry. These reduce time and cost through efficient utilization of orthodontics and dental practices. In fact, dental 3D printers became mainstream in 2020.
AI & Robotics: AI has been shaping the dental industry for quite some time now. This decade is likely to see the rise of computing power, which has become more accessible and affordable for dental practitioners. It will transform the way dentists work and patients receive treatment, especially with the introduction of robot dentists.
Robots are now able to perform minimally-invasive dental work like filling cavities and extracting teeth. A report by National Business Capital & Services suggests that AI dentistry had already become mainstream by 2019-end.
The Zacks Medical Dental Supplies industry falls within the broader Zacks Medical sector.
It carries a Zacks Industry Rank #110, 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 bleak 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 supplies 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.
The industry has outperformed its own sector in the past year but fell short of the Zacks S&P 500 composite in the same time frame.
Stocks in this industry have collectively gained 19.3% against the Zacks Medical sector’s decline of 7.3%. The S&P 500 rallied 32.5% in the same time frame.
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 19.17X compared with the S&P 500’s 22.06X and the sector’s 22.76X.
Over the last five years, the industry has traded as high as 20.17X and as low as 13.63X, with the median being at 17.29X.
McKesson Corporation: McKesson is a health care services and information technology company. Despite the markets still recovering from the impact of COVID-19, the company commenced fiscal 2022 robustly. Backed by the fiscal second-quarter 2022 performance, management remains confident about the second half of the fiscal year as well.
McKesson has raised its fiscal 2022 earnings outlook, courtesy of robust second-quarter performance and higher contribution from the U.S. government’s COVID-19 vaccine distribution and kitting programs. The company carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
For this San Francisco, CA-based company, the Zacks Consensus Estimate for 2022 revenues indicates an improvement of 8.7%, while the same for earnings suggests growth of 29.1%. It has a trailing four-quarter earnings surprise of 19.9%, on average.
West Pharmaceutical Services Inc.: West Pharmaceutical is a leading global manufacturer with respect to design and production of technologically advanced, high-quality, integrated containment and delivery systems for injectable drugs and healthcare products. It delivered a solid third-quarter 2021 performance driven by solid organic sales growth in both of its base businesses and sustained solid adoption of its high-value products (HVP), and strong execution and leveraging of its global operating model.
For this Exton, PA-based company, the Zacks Consensus Estimate for 2021 revenues suggests growth of 30.9%, while the same for earnings indicates an increase of 77.1%. It has a trailing four-quarter earnings surprise of 29.4%, on average. Presently, the company carries a Zacks Rank of 3 (Hold).
Cardinal Health, Inc.: Cardinal Health is a nation-wide drug distributor and provider of services to pharmacies, healthcare providers and manufacturers. The company’s Pharmaceutical segment is the second largest pharmaceutical distributor in the United States.
The segment's products and services comprise pharmaceutical distribution, manufacturer and specialty services, and nuclear and pharmacy services, which are expected to drive performance in the quarters ahead. Cardinal Health’s Medical and Pharmaceutical offerings provide the company with a competitive edge in the niche space. The company remains focused on evolving growth areas with investments and partnerships in Specialty, at Home and Services.
For this Dublin, OH-based company, the Zacks Consensus Estimate for fiscal 2022 revenues suggest growth of 7.4%. The same for earnings indicates an improvement of 2.7%. Currently, the company carries a Zacks Rank #3.
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