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3 Dental Stocks Poised to Perform Well in Second-Half 2021

·5 min read

With the first half of the year already behind us, we can see the economies worldwide are gradually picking up the pieces after a tumultuous 2020.

Per the Centers for Disease Control and Prevention (“CDC”) data (according to a CNBC report), 70% of adults in the United States have had at least one shot of a COVID-19 vaccine, which is a noteworthy milestone for the nation. Nevertheless, it is a month behind President Biden’s Fourth of July goal.

However, the fear of the highly-transmissible coronavirus Delta variant disrupting the ongoing vaccination process and derailing the economic recovery has made market watchers apprehensive. Even though the case counts are dropping, the Delta variant is still on the rise in some states as the country heads toward fall season and colder weather.

Amid this uncertainty, dental space, which showed signs of recovery in the second half of 2020, is one of the areas in the MedTech sector that continues to hold its ground. Interestingly, dental care continues to be delivered safely, following the guidance and recommendations of the American Dental Association (ADA) and CDC.

It is the right time for investors to park their funds with key dental players. With a potential upside on this front, investors can safely place their bets on such players to reap long-term returns.

Dental Space Gaining Traction

On the back of the momentum of recovery witnessed by the companies in this space, patient volume continues to see an encouraging increase despite the resurgence in Delta variant cases. It is worth mentioning that there have not been any substantial changes in the demand for dental supplies or closure of dental practices for elective procedures.

Although the risk of contracting the virus has led to a lower number of patient appointments available on a daily basis, clinicians have taken actions to counteract this impact. While some clinicians have resorted to teledentistry; others, especially dental support organization customers, have been focusing on maximizing patient procedures per visit.

In fact, dentists will continue to require dental consumables and lower-cost equipment as they would be wary of making large investments in high-cost equipment amid this uncertain scenario. Companies dealing in these are well-positioned to reap the benefits during this crisis. Most of the players in this space are being cautiously optimistic, as evident from new product launches and remote consultation technologies. For instance, Align Technology’s ALGN investment in a number of teledentistry solutions to help make remote check-ups a reality is worth a mention.

Notably, per a report by ReportLinker, the global dental services market is anticipated to grow from $365.57 billion in 2020 to $435.08 billion in 2021 at a CAGR of 19% on the back of companies rearranging their operations and recovering from the impact of the pandemic. The market is projected to reach $551.91 billion in 2025 at a CAGR of 6%.

3 Promising Stocks to Watch

Here we have picked three dental stocks that have solid growth potential and exhibited considerable prowess amid the pandemic-induced volatility.

West Pharmaceutical Services, Inc. WST: West Pharmaceutical delivered robust performance in the second quarter of 2021 aided by solid organic sales growth in both of its base businesses and improving demand for products related to COVID-19 vaccines. The company’s high-value products (HVP), along with productivity gains, continue to drive higher gross and operating margins. It continues to witness strong uptake of HVP components, which include Westar, FluroTec, Envision and NovaPure offerings, and Daikyo’s Crystal Zenith. A raised financial outlook for 2021 instills further optimism in the stock. In fact, net sales for full-year 2021 are projected between $2.76 billion and $2.79 billion (up from the prior range of $2.63-$2.65 billion), while adjusted earnings per share for 2021 is anticipated in the band of $8.05 to $8.20 (up from the previous range of $6.95-$7.10 per share). The company’s long-term earnings growth rate is projected at 28.4%.

Shares of this Zacks Rank #1 (Strong Buy) company surged 59.7% on a year-to-date basis, compared with the industry’s growth of 17.2%. You can see the complete list of today’s Zacks #1 Rank stocks here.

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Henry Schein, Inc. HSIC: Henry Schein exited the second quarter of 2021 on an extremely bullish note with better-than-expected results despite coronavirus outbreak adversities. The company saw robust performances by all three of its operating businesses. The company’s international performance was also impressive. Strengthening demand in the global dental and medical markets drove a strong year-over-year increase in sales in the reported quarter. The Zacks Rank #2 (Buy) company registered strong equipment growth in international markets with no significant delay from the manufacturers' side. Overall dental sales reflect continued recovery in patient traffic compared to the pre-pandemic levels. Expansion of both the margins is encouraging as well. The company’s long-term earnings growth rate is projected at 13.9%.

Year to date, shares of the company gained 17.5% compared with the industry’s rally of 17.2%.

Merit Medical Systems, Inc. MMSI: In the second quarter of 2021, Merit Medical displayed considerable strength with better-than-expected results. The company saw revenue growth not only across both its segments but also across all product categories within its Cardiovascular unit. Strong execution and improving customer demand trends resulting from the gradual business recovery fueled the overall top-line performance. The company stands to benefit from the execution of its global growth and profitability plan. A robust product line and other internally developed products raise investors’ optimism on the stock. Expansion of both margins bodes well. A raised financial outlook for the full year also raises optimism in the stock. The company’s long-term earnings growth rate is projected at 12.7%.

Shares of the Zacks Rank #2 company gained 30.5% on a year-to-date basis, compared with the industry’s rise of 17.2%.

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Align Technology, Inc. (ALGN) : Free Stock Analysis Report

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