Sirona Dental falls after analyst cuts rating

NEW YORK - A Robert W. Baird analyst downgraded shares of dental equipment maker Sirona Dental Systems Inc. Friday, saying the stock is likely to remain static while Henry Schein Inc. could offer better returns.

Jeff Johnson cut his rating on Sirona, which makes digital X-ray systems for dentists, to "Neutral" from "Outperform." He said the stock will stay around its current price until March 2009 at the earliest. While dental equipment stocks may recover in the second half of the year, he said Henry Schein's greater product diversity and better financial position make the stock more attractive.

Henry Schein distributes dental, surgical and veterinary supplies, and is not a manufacturer.

In midday trading, shares of Long Island City, N.Y.-based Sirona fell 17 cents to $11.63, and Henry Schein stock declined 15 cents to $33.06.

The analyst said Sirona could get a lift if it introduces worthwhile new products at the 33rd International Dental Show, scheduled for March 24-28 in Germany.

Many medical equipment stocks are hurting because of the U.S. recession and less favorable foreign currency exchange rates, which have harmed sales overseas. Johnson said Sirona is looking at a "rough" first half of 2009, a period when the company expects revenue to decline compared with fiscal 2008. Although Johnson said dental stocks may recover in the second half of the year, he felt Schein is a better choice because it is more diversified.

He added that Schein also has a better chance than Sirona to gain market share or make a productive acquisition.

In a telephone interview, Sirona Vice President of Investor Relations John Sweeney said Schein is the company's second-largest U.S. distributor, after Patterson Cos. He said economic conditions are a factor for many companies.

"As you look around the world it's not surprise we're seeing difficult economic circumstances and that will translate to a more difficult operating environment, not just for Sirona but for everybody," he said.

The analyst lowered his target on Sirona shares to $15 from $21. But he said the stock's downside is limited because of Sirona's planned buyback of up to $50 million in stock, which the company announced Thursday.

Based on Thursday's closing price, that would total 4.2 million shares of stock, or about 13 percent of the company's outstanding stock as of Dec. 1.

Sirona reported its fiscal fourth-quarter results Thursday. It swung to a loss due to a large amortization charge, but revenue was equal to Wall Street expectations. The company said its fiscal 2009 operating income and revenue will be similar to its fiscal 2008, implying a decline in the first half of the year and growth in the second half.

The company's fiscal year ends Sept. 30.

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