Back to top

Analyst Blog

On Sep 16, 2013, we maintained our long-term Neutral recommendation on Henry Schein Inc. (HSIC - Analyst Report) following solid second-quarter 2013 results. This leading global distributor of health care products and services carries a Zacks Rank #3 (Hold).

Why Still Neutral?

Henry Schein continues to record healthy quarterly performance. In the second quarter, adjusted EPS rose 10.8% year over year to $1.23, beating the Zacks Consensus Estimate by a penny. Revenues increased 8.6% to $2.39 billion in the quarter, marginally ahead of the Zacks Consensus Estimate of $2.38 billion.

The company continues to gain from its broad footprint in the fast growing animal health market. The growth in its core dental business also bolstered confidence. Henry Schein is well positioned to further gain from its extensive global foothold and diverse channel mix. It also stands to gain from attractive market dynamics and favorable demographic trends. We believe that Henry Schein’s aggressive strategy of tuck-in acquisitions should boost its growth profile.

Given the current growth trend, the company raised the lower end of the guidance range for 2013. At present, Henry Schein envisages adjusted EPS in the range of $4.86−$4.91, representing growth of 9%−11% year over year, compared with prior guidance of $4.81−$4.91.

On the tepid side, the rising prominence of group purchasing organizations (GPOs) has increased pricing pressure in the industry. This might be a drag on Henry Schein’s business in the future. The contagion of global economic problems continues to remain an overhang on the healthcare industry. While the dental business continued to face pressure in selective international markets, the animal health market growth rate across Europe remained sluggish.

In addition, currency headwinds continue to downplay quarterly results as seen in the 0.1% negative impact on top-line growth from unfavorable currency movements in the reported quarter. The company also faces tough competition in each business line.

Stocks that Warrant a Look

While we remain on the sidelines for Henry Schein, we are positive about The Cooper Companies Inc. (COO - Analyst Report), Align Technology Inc. (ALGN - Analyst Report) and MWI Veterinary Supply, Inc. (MWIV - Analyst Report) doing well. These stocks carry Zacks Rank #2 (Buy).

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
RPC INC RES 24.91 +8.35%
LITHIA MOTO… LAD 94.59 +4.60%
DELTA AIR L… DAL 39.15 +3.90%
FLAMEL TECH… FLML 14.51 +3.50%
SOUTHWEST A… LUV 28.87 +2.92%