Republished. Original Source: Baird Equity Research
Monthly Dental Survey
In our June 2021 dental survey, patient volumes improved to -0.3% vs. pre-COVID/2019 levels, while procedural feedback also improved across both high- and low-acuity categories and respondent sentiment hit another eight-year high. While most dental stocks have recently traded sideways after outperforming earlier this year on the heels of 4Q-20 and 1Q-21 revenue and earnings upside surprises, we still see room for such surprises across our entire dental list over the balance of this year, with ALGN, XRAY, and NVST our top ideas across the group.
- In our 34th dental survey since the onset of the global COVID-19 pandemic (n=96), patient volumes increased 13.8% y/y. Trying to adjust, however, for easy comps last year due to COVID office closures, respondents suggest patient volumes relative to "pre-pandemic" 2019 levels were down 0.3% in June, improved vs. -3.4% in May, -6.7% in April, and -8.4% in March. This is clearly the best volume feedback we've seen in our ongoing survey work since the start of the pandemic and seems to suggest domestic patient volumes have essentially rebounded to pre-pandemic levels.
- On a procedural basis, demand again this month improved nicely vs. the last few months across nearly all high and low-acuity treatment categories. We believe these sequential improvements across low-acuity treatment categories (preventative, lower-end restorative, etc.) reinforce the improved patient volume feedback above, while improved high-acuity demand findings suggest consumers continue to spend on higher-end, oftentimes discretionary, dental procedures such as orthodontics (including clear aligners) and, to a lesser extent, dental implants.
- Other key updates discussed throughout this survey include:
- Qualitative feedback regarding recent monthly demand trends also show June month-to-date strongest yet this year, with demand in May the second best (after June) of recent months.
- Future exam bookings for both new and established patients reached COVID-era highs, suggesting near/intermediate-term demand pipeline also remains solid.
- Both office capacities and capacity utilization remained at or above COVID-era highs, while dentist sentiment (both current and 3-6 month outlook) also hit all-time highs dating back the 8+ years we've been asking this sentiment question.
- Equipment spending expectations remain more tempered than patient volumes/procedural mix feedback and remains an area to watch. But spending expectations over the next 12-months for both basic and high-tech equipment has improved a bit over our last few surveys, likely reflecting the improving dentist sentiment and patient volumes.
Bottom line: with patient volumes continuing to improve sequentially and mix/acuity holding in well (in this survey from a U.S. perspective and more broadly across the globe in our checks), we believe there remains room for upside surprises and positive estimate revisions across our entire list of covered dental names over at least the next few quarters. As such, we continue to recommend fairly broad exposure to the group going forward, with ALGN remaining our top idea across the space given accelerating clear aligner penetration, followed by XRAY and NVST (still solid mix helping specialty growth for each).