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Dental Market Shows Strength Despite Pandemic: 3 Stocks to Watch

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Trina Mukherjee
·6 min read
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The resurgence in coronavirus cases globally has put reopening plans in disarray as people continue to struggle and the United States is not an exception. However, stimulus packages like America Rescue Plan, American Jobs Plan (a third one on the cards), which are aimed at boosting the economy and putting an end to the pandemic, have provided much-needed relief.

Coming to the MedTech sector, which showed considerable resilience last year despite the pandemic-led disruption, the dental space displayed signs of recovery much later (second half of 2020). Interestingly, even with the resurgence in cases, dental care continues to be delivered safely, following the guidance and recommendations of the American Dental Association (ADA) and Centers for Disease Control and Prevention (CDC).

With uncertainty still keeping investors on tenterhooks, it would be a prudent decision to capitalize on this space amid the pandemic. Let us delve deeper.

Dentistry: Braving the Pandemic

Even though vaccinations are in full swing, more contagious variants of the virus and time-consuming procedure of rolling out the vaccines to the general public have renewed apprehensions.

However, dental offices have not closed down in recent months, as dentists and hygienists have been safeguarding themselves as well as patients by not only wearing personal protective equipment (PPE) but also putting away aerosol-spewing power equipment. Moreover, the pre-pandemic and post-pandemic picture looks different with many dentists allowing only one patient in their offices at a time.

Dental Market: Bright Prospects

Riding on the momentum of recovery witnessed by some of the companies in this space (from last year July), patient volume continues to see an encouraging increase despite the spike in infections. 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 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 focused on maximizing patient procedures per visit.

Notably, dentists will continue to require dental consumables and lower-cost equipment and 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, primarily courtesy of new product launches and remote consultation technologies. For instance, Align Technology’s ALGN investment in a number of teledentistry solutions to help making 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

As 2021 progresses, investors can keep an eye on stocks that have shown considerable prowess amid the pandemic-induced volatility and have solid growth potential.

DENTSPLY SIRONA Inc. XRAY: DENTSPLY SIRONA saw consumable revenue growth in the fourth quarter of 2020. The company continued gaining from the launch of Axeos, Primemill and SureFil one as these received favorable customer feedback through the fourth quarter. Apart from these proven products, the company has an excellent new product pipeline that will positively impact 2021 and beyond. Also, the strategic buyouts of Byte, which is a rapidly-growing direct-to-consumer, doctor-directed clear aligner company, and Datum Dental (likely to add the clinically superior proprietary technology GLYMATRIX and its strong OSSIX biomaterial to the DENTSPLY SIRONA’s digital dentistry portfolio) buoy optimism in the stock. The company’s long-term earnings growth rate is projected at 20%.

Shares of this Zacks Rank #2 (Buy) company gained 24.6% on a year-to-date basis, compared with the industry’s growth of 6.9%. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

McKesson Corporation MCK: The healthcare services and information technology company showed substantial strength in its third-quarter fiscal 2021 results, with its segmental strength in the quarter being a positive. Multi-year growth initiatives and strong position in Distribution market continue to favor the stock. Also, a raised fiscal guidance fuels optimism in the stock. For fiscal 2021, McKesson projects adjusted earnings per share of $16.95-$17.25 (up from the previously mentioned $16-$16.50). The company’s long-term earnings growth rate is anticipated at 7.2%.

Shares of this Zacks Rank #3 (Hold) company appreciated 9.6% on a year-to-date basis, compared with the industry’s growth of 6.9%.

Merit Medical Systems, Inc. MMSI: Merit Medical continues to gain significant momentum on the back of new products and is optimistic about the product pipeline. The company’s international exposure also instills confidence in the stock. In fact, the company’s international revenues grew 1.2% on a reported basis. Moreover, its two largest markets outside the United States (OUS) are APAC and EMEA, representing approximately 49% and 44% of its total international sales, respectively, in the fourth quarter of 2020. Further, a strong 2021 revenue outlook is encouraging. The company’s long-term earnings growth rate is anticipated at 7.2%.

Shares of this Zacks Rank #3 company climbed 10.6% on a year-to-date basis, compared with the industry’s growth of 6.8%.

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