DENTSPLY International (XRAY) Stays Neutral

We reiterate our Neutral recommendation on DENTSPLY International (XRAY), a global leader in the design, development, manufacture and marketing of dental products. Earnings for the second quarter missed the Zacks Consensus Estimate by a penny. However, the company posted top-line improvement, fuelled by acquisitions and recovery in the global dental market.

DENTSPLY’s diversified product portfolio hedges it from any significant sales shortfall in a volatile economy. The company’s overall growth strategy rests on product innovation. DENTSPLY is pursuing several research and development initiatives to support technological development, which include partnerships and collaborations with various research institutions and dental schools.

DENTSPLY has a strong international presence. The company’s products are used in over 120 countries in the world, enabling it to leverage the changing dental practice across North America and Western Europe, which emphasizes preventive care and cosmetic dentistry. Moreover, DENTSPLY is pursuing an aggressive acquisition strategy to boost growth.

Moving forward, DENTSPLY is expected to benefit from the resurgent global dental market with several product segments and regions showing signs of growth. Not being a life-sustaining product, the dental market was badly affected by the economic downturn that resulted in patients deferring their adoption.

DENTSPLY’s diverse product range, significant international presence, new product introductions and acquisition initiatives are expected to boost operating metrics over the forthcoming quarters. Moreover, the company is poised to grow its share of the dental implant market driven by a strong product base and significant investment on product/technology innovation and sales/marketing infrastructure.

However, we take a cautious stance as DENTSPLY’s international operations are exposed to foreign exchange translation risk given the devaluation of the euro against the U.S. dollar. Factoring in the currency exchange headwinds, DENTSPLY has trimmed its earnings guidance for fiscal 2010. Moreover, growth in DENTSPLY’s domestic market has ebbed due to a slow economic recovery.

DENTSPLY INTL (XRAY): Free Stock Analysis Report

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