Dental supply company Dentsply (NASDAQ:XRAY) will report first-quarter 2007 financial results on Monday, April 30.

What analysts say:

  • Buy, sell, or waffle? Eight analysts probe the molars of Dentsply, with six saying there are no cavities and rating it a buy. Two want Dentsply to rinse first, and so rate it a hold.

  • Revenues. Revenues are expected to rise by 5% to $452.9 million, the same slow, steady progression the dental supply company typically enjoys.

  • Earnings. Profits, though, tend to jump around. This time out, they're expected to get a good bite, with a 9% increase to $0.36 per share.

What management says:
The big question mark for Dentsply this quarter, and probably the next as well, will be how well its change in product distribution plays out. Last year Dentsply slashed its list of preferred distributors from 200 down to the 28 that accounted for more than 90% of the dental supply company's business. Of that, Sullivan-Schein, a subsidiary of Henry Schein (NASDAQ:HSIC), and Patterson (NASDAQ:PDCO), are the largest.

Although overall, sales rose last quarter, revenues in the U.S. -- where the distributor change took place -- were off more than 5%, which the company attributed to the new preferred list as well as a price increase that caused early purchases of product. The challenge will be to see whether the relationships that were severed by the distributor change have caused an adverse impact that will take time to repair and caused buyers to shop elsewhere permanently.

What management does:
Dentsply makes dental consumables, specialty products, and lab products, and then distributes them through its distributors to dentists -- though it also sells a sizeable portion of its supplies directly to them as well. The growth in margins, while looking sizeable, actually had more to do with a restructuring the company undertook previously and various other charges which artificially lowered profits.

























All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
While there may be some short-term effects from the distributor change, I'm not convinced it will be particularly long-lasting, even if they are consequential this quarter. The 28 preferred distributors comprise 90% of Dentsply's business, or around $405 million of projected quarterly revenues. Dentists that may have been using smaller distributors cut out of the loop can turn to one of those on the preferred list, and Dentsply itself has been pushing direct sales as well. For that reason I think the impact will be minimized, though growth may come in under the company's usual 4% to 6% range. While there are rarely smooth transitions, any weakness that Dentsply's stock shows as a result would appear to be an excellent opportunity to buy.

Related Foolishness:

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Fool contributor Rich Duprey owns shares of Dentsply but does not own any of the other stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.