Straumann Earnings: Solid Results, Buoyed by Wins in China and Latin America, Reflect Resilience

Narrow-moat Straumann STMN reported third-quarter earnings that were largely in line with our expectations, and we maintain our fair value estimate of CHF 94 per share. Total sales grew 3.7% year over year (11% on constant currency) thanks to strong performance from Asia-Pacific and Latin America with some offsets from unfavorable foreign exchange. During the quarter, Straumann pre-launched iExcel, a new premium implant system designed to combine apically- and fully-tapered implants with both bone- and tissue-level options. We think this bolsters the firm’s already strong position in the premium implant market, improves its positioning in a fast-growing adjacent area, and substantiates its narrow moat. The system should launch first in North America during early 2024 with rollouts in Europe during the second half of the year.

North America and Europe both showed modest gains, up 5.5% and 6.6% year over year on constant currency. While the two regions posted lower growth than historical levels from Straumann, we are still impressed at the firm’s ability to grow the business amid a difficult macroeconomic backdrop. Aesthetic surgical procedures, such as implants and clear aligners, usually face major swings in an inflationary environment as consumers pull back on discretionary spending, and we have seen this impacting other dental firms during the quarter. But Straumann has managed to still post solid results that we attribute to its competitive advantage and resilience in the market. While we expect near-term difficulties to continue from slowed patient flow and lowered demand in complex cases, we expect the firm to weather these challenges better than other dental players.

Better-than-expected performance in China continues to support the firm. Despite the volume-based procurement policy lowering average selling price of implants sold in the region by roughly 50%, we see that the volume gained through tender and lower costs maintained strong top-line growth.