Overview
l Each month we contact private manufacturers, distributors, and other
industry contacts to discuss current trends and the acceptance of new
products in the dental industry. This report summarizes our 2Q09 research
on the dental market, including the consumable, equipment, and laboratory
segments of the industry.
l In 2Q09, our research suggests North American dental product sales through
distributors have decreased 5.8% year-over-year, down slightly from a 5.5%
decline in 1Q09.
l We expect dental equipment sales to decrease 11% year-over-year in 2Q09,
down from a 9.5% decline last quarter. While we believe PDCO will achieve
negative low-double-digit dental equipment internal growth this quarter, we
expect a more modest decline at HSIC.
l Similar to last quarter, we expect dental consumable sales to decline 4% in
2Q09, with stronger currency growth helping to offset a 100 bps decline in
internal growth. In the quarter, we believe both PDCO and HSIC will gain
market share in dental consumables.
l Our research suggests that year-over-year growth in the U.S. dental lab
market decreased 5.7% in 2Q09, down 80 bps from a 4.9% decline in 1Q09.
Notably, this was the third consecutive quarter that U.S. dental lab growth
has been negative in our survey.
l We are increasing our FY09 EPS estimates for XRAY and PDCO to reflect a
more favorable contribution from foreign currency. We now expect PDCO to
achieve FY10 (ended April 2010) EPS of $1.74 while our FY09 XRAY EPS
estimate is now $1.87. Notably, we have previously updated our EPS
estimates for HSIC to reflect more positive foreign currency benefits.