Morningstar | Dentsply Sirona Faces Dental Industry Headwinds Amid Restructuring Efforts
Dentsply Sirona is one of the leading players in the dental market thanks to its product breadth and long history of innovation and acquisitions. An aging population, the rising importance of cosmetic procedures, and a growing emerging-market middle class support growth opportunities but have also attracted more competition and puts the firm on a defensive footing.A significant portion of Dentsply Sirona’s revenue is driven by its diversified dental consumables portfolio, but we believe the company's main strengths exist in the specialty markets of endodontics, orthodontics, and implants, along with its CAD/CAM equipment. Greater regulatory oversight and training requirements, as well as the need for reliable products, sustain a higher degree of customer stickiness in these markets than its consumables business. Dentsply's 2011 acquisition of Astra Tech nearly doubled the company’s implant revenue and established the firm as a major player, behind Straumann and Nobel (Danaher). The company’s more recent merger with Sirona Dental Systems, a leader in digital dentistry equipment, expanded the firm’s exposure to higher margin CAD/CAM and imaging technology. However, threats remain on the horizon for Dentsply Sirona. We see the Astra Tech and Sirona deals as defensive plays to shift Dentsply Sirona from its more commodified consumables business in response to greater competition. Dental distributors like Henry Schein continue to develop low-cost private-label products and have plans to introduce more value options in the typically less competitive specialty markets. While we think Dentsply is well positioned to compete in premium and value-based markets around the globe in the near term, the emergence of lower-priced competitors remains a big risk to the company’s long-term competitive advantages. We believe future growth hinges on Dentsply Sirona’s ability to innovate, which will increasingly become more difficult and expensive in the face of rising competitive pressure.DENTSPLY SIRONA is a manufacturer of dental products and technologies. The company's Consumables segment is responsible for the design, manufacture, sales and distribution of the company's dental consumable products which include preventive, restorative, endodontic, and dental laboratory products. The company's Technologies and Equipment segment includes responsibility for the design, manufacture, sales and distribution of the company's dental technology and equipment products and healthcare consumable products, including dental implants, computer-aided design/computer-aided manufacturing systems, orthodontic clear aligner products, imaging systems, treatment centers, instruments, and consumable medical device products.
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