Dental products supplier Dentsply (NASDAQ:XRAY) will report Q4 2006 financial results on Tuesday, Feb. 6, filling in the rest of the operating picture.

What analysts say:

  • Buy, sell, or waffle? Of the eight analysts examining Dentsply, six rate it a buy, while two say hold.
  • Revenues. Revenues are estimated to rise 4.5% to $467.6 million.

What management says:
Growth in the dental market has been fairly steady for Dentsply, with sales growing nearly 6% last quarter when you back out the cost of precious metals. Actual operating results are hidden in a small labyrinth of costs and expenses that can and should be factored out to get to the root of the company's profits: precious metals costs, stock option expensing (which won't be a factor next year in making apples-to-apples comparisons), tax adjustments, and restructuring of the work force. It also had to reclassify some short-term investments and restate its financials, so extracting an equal comparison will be as touchy as an exposed nerve. Yet there doesn't appear to be anything on the horizon which would displace Dentsply as the No. 1 or No. 2 supplier in its markets.

What management does:
Operating efficiencies and a restructured distribution program have improved margins for Dentsply. Instead of 200 distributors, the company now has just 28 selling 90% of its products. The restructuring partially offset some of the strong performance, as it will in the fourth quarter, too. But the company will also experience gains from tax adjusts and the sale of a facility. Higher SG&A costs last quarter came mostly from the expensing of stock options, though if the prior year's results had included expensing costs, this quarter's results would have been an improvement.

























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:
Dentsply has long been the leading company in the field and has consistently churned out steady growth, something you'd expect from a field as exciting (*yawn*) as dental implants. The business does have catalysts that could drive future growth, but I wouldn't expect them to show up this quarter.

The implant market in the U.S. is primarily covered by oral surgeons and prosthodontists, who perform 90% of the procedures. That's skewed compared to the rest of the world, where the market is split about evenly between oral surgeons and endodontists, and general practitioners. Dentsply sees the need for dental implants outstripping the supply of people available to do the work here, so it has been deploying its sales force to get those GP's who have been performing at least some sort of surgical procedures to invest in regularly performing implants. Given a minimal capital outlay for equipment, Dentsply sees a large return by targeting this market and once again being first in supplying it.

With all of the adjustments that the company will need to perform this quarter, I'm not expecting anything earth-shattering -- probably just more of the same. Yet when you drill down further, I think it becomes apparent that Dentsply could strike a nerve and see more robust growth in the future.


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Fool contributor Rich Duprey owns shares of Dentsply, but he 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.