Dentsply Opens Wide

Dental supply company Dentsply (NASDAQ:XRAY) was expected to implode when it reduced its 200-strong distributor list down to just 28. Instead, the dental parts and products company said initial data shows that its continuing distributors have been capturing market share during this transitional period.

Net revenue jumped nearly 10% to $473 million, handily beating analyst estimates. When you strip out the effects of precious metals content, revenues came in at $423 million, also well ahead of similar results last year. An equally impressive 23% increase in diluted EPS, to $0.38, also beat forecasts.

Several factors could have played havoc with Dentsply's results this quarter, but it seems that the strength and nature of its business minimized their impact. For example, when Dentsply took a scalpel to its distributor list, it also offered those on the discontinued list the opportunity to buy more supplies for 60 days. This could have boosted sales initially while cutting into the remaining distributors' sales afterwards. Although some on the list took advantage of the opportunity, the impact does not appear to be meaningful.

Additionally, the company raised prices back in October, which increased a lot of pre-buying. While that undoubtedly helped fourth-quarter sales, it doesn't appear to have affected first-quarter numbers. It seems that Dentsply has achieved respectable organic growth both here and abroad, with Europe contributing the most. While it was helped along by a strong euro, Dentply's specialty products have nonetheless been achieving double-digit sales increases.

Dentsply typically puts up workmanlike revenue increases between 4% and 6%, and the first quarter's results have allowed it to reaffirm its full-year profit of between $1.56 and $1.61 per share, an increase of as much as 14% from last year.

With distributors such as Patterson (NASDAQ:PDCO) and Sullivan-Schein, a subsidiary of Henry Schein (NASDAQ:HSIC) leading the sales effort, getting past the bumps in North America caused by the distributor change should be easier. With Europe and Asia giving exceptional performances and international sales accounting for more than half of total revenues, these markets remain as lucrative as ever.

Two years ago, Germany -- which alone contributes one-quarter of all of Dentsply's revenue -- changed doctor reimbursement plans, raising concerns about Dentsply's continued ability to operate consistently. Those fears were basically put to rest last quarter, when Dentsply announced that the country was once again on a growth plane, having increased German sales 5% from the year before. It looks like Dentsply's checkup has gotten a clean bill of health.

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