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Henry Schein (HSIC) Up 7.5% Since Last Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for Henry Schein (HSIC - Free Report) . Shares have added about 7.5% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Henry Schein due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Henry Schein Q3 Earnings Top Estimates, Margins Dip
Henry Schein reported adjusted earnings per share of $1.03 from continuing operations in the third quarter of 2020, reflecting an improvement of 14.4% from the year-ago earnings per share of 90 cents. Moreover, adjusted earnings per share surpassed the Zacks Consensus Estimate by 43.1%. The quarter’s adjustments exclude the impact of certain restructuring charges.
GAAP earnings per share in the third quarter was 99 cents, up by 8.8% from the year-ago EPS of 91 cents.
The year-over-year earnings were primarily driven by a strong rebound in sales since the end of the second quarter along with strength in demand for personal protective equipment (“PPE”) and COVID-19-related products.
Revenues in Detail
Henry Schein reported net sales of $2.84 billion in the third quarter, up 13.2% year over year. The metric beat the Zacks Consensus Estimate by 16.6%.
The year-over-year uptick resulted from strong business recovery and included a 13% internal growth in local currencies, 0.1% growth from acquisitions and 0.1% growth related to foreign currency exchange.
In the quarter under review, the company recorded sales of $2.13 billion in the North American market, up 14.8% year over year. Sales totaled $707.6 million in the international market, up 8.6% year over year.
Segment Analysis
Henry Schein derives revenues from three operating segments — Dental, Medical, and Technology and Value-added Services.
In the third quarter, the company derived $1.65 billion of global Dental sales, up 6.7% year over year. This includes a 6.6% uptick in local currencies and 0.1% positive impact of foreign currency exchange. At local currencies, internally-generated sales improved 6.5%, which included an increase of 6.3% in North America and of 6.9% internationally. Further, acquisition growth was 0.1%.
North America’s dental consumable merchandise internal sales in local currencies rose 8.1% whereas dental equipment internal sales in local currencies inched up 0.2%. Internationally, dental consumable merchandise internal sales and dental equipment internal sales, both in local currencies, improved 11.1% and fell 6.9% respectively.
Global Medical revenues surged 27.8% year over year to $1.03 billion, resulting from a 27.7% rise in local currencies. In local currencies, internally-generated sales grew 27.7% while acquisition growth was flat. Foreign currency exchange had an impact of 0.1%.
The business registered strong demand for PPE and COVID-19-related products in the quarter under review.
Revenues from global Technology and Value-added Services inched up 0.7% to $138.4 million. This included a 0.3% improvement in local currencies and a 0.4% uptick owing to currency translation. At local currencies, internally-generated sales declined 1.3% but acquisition growth was 1.6%.
The marginally lower revenues in the company’s Technology and Value-Added Services internal sales in local currencies was due to lower-than-historical patient flow resulting from lower Henry Schein One transactional revenue. Additionally, the company’s financial services revenues were adversely impacted by lower equipment sales volume.
Margin Trend
In the reported quarter, gross profit totaled $754.3 million. Gross margin contracted 378 basis points (bps) to 26.6% on a 0.9% fall in gross profit.
Selling, general and administrative expenses declined 2.6% to $559.6 million in the quarter under review.
Overall adjusted operating profit was $194.7 million, up 4.4% year over year. However, adjusted operating margin contracted 58 bps year over year to 6.9%.
Financial Position
The company exited the third quarter of 2020 with cash and cash equivalents of $533.5 million compared with $296.1 million at the end of the second quarter. Long-term debt for the company at the end of the third quarter was $515.4 million compared with $515.8 million at the end of the second quarter of 2020.
Cumulative net cash used in operating activities from continuing operations at the end of the third quarter was $248.4 million compared with net cash provided by operating activities from continuing operations of $525.2 million in the year-ago period.
2020 Guidance
As the uncertainty of the pandemic and its impact on business operations cannot be ascertained at present, the company is not providing any financial guidance for the year right now.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 7.78% due to these changes.
VGM Scores
At this time, Henry Schein has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Henry Schein has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Henry Schein (HSIC) Up 7.5% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Henry Schein (HSIC - Free Report) . Shares have added about 7.5% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Henry Schein due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Henry Schein Q3 Earnings Top Estimates, Margins Dip
Henry Schein reported adjusted earnings per share of $1.03 from continuing operations in the third quarter of 2020, reflecting an improvement of 14.4% from the year-ago earnings per share of 90 cents. Moreover, adjusted earnings per share surpassed the Zacks Consensus Estimate by 43.1%. The quarter’s adjustments exclude the impact of certain restructuring charges.
GAAP earnings per share in the third quarter was 99 cents, up by 8.8% from the year-ago EPS of 91 cents.
The year-over-year earnings were primarily driven by a strong rebound in sales since the end of the second quarter along with strength in demand for personal protective equipment (“PPE”) and COVID-19-related products.
Revenues in Detail
Henry Schein reported net sales of $2.84 billion in the third quarter, up 13.2% year over year. The metric beat the Zacks Consensus Estimate by 16.6%.
The year-over-year uptick resulted from strong business recovery and included a 13% internal growth in local currencies, 0.1% growth from acquisitions and 0.1% growth related to foreign currency exchange.
In the quarter under review, the company recorded sales of $2.13 billion in the North American market, up 14.8% year over year. Sales totaled $707.6 million in the international market, up 8.6% year over year.
Segment Analysis
Henry Schein derives revenues from three operating segments — Dental, Medical, and Technology and Value-added Services.
In the third quarter, the company derived $1.65 billion of global Dental sales, up 6.7% year over year. This includes a 6.6% uptick in local currencies and 0.1% positive impact of foreign currency exchange. At local currencies, internally-generated sales improved 6.5%, which included an increase of 6.3% in North America and of 6.9% internationally. Further, acquisition growth was 0.1%.
North America’s dental consumable merchandise internal sales in local currencies rose 8.1% whereas dental equipment internal sales in local currencies inched up 0.2%. Internationally, dental consumable merchandise internal sales and dental equipment internal sales, both in local currencies, improved 11.1% and fell 6.9% respectively.
Global Medical revenues surged 27.8% year over year to $1.03 billion, resulting from a 27.7% rise in local currencies. In local currencies, internally-generated sales grew 27.7% while acquisition growth was flat. Foreign currency exchange had an impact of 0.1%.
The business registered strong demand for PPE and COVID-19-related products in the quarter under review.
Revenues from global Technology and Value-added Services inched up 0.7% to $138.4 million. This included a 0.3% improvement in local currencies and a 0.4% uptick owing to currency translation. At local currencies, internally-generated sales declined 1.3% but acquisition growth was 1.6%.
The marginally lower revenues in the company’s Technology and Value-Added Services internal sales in local currencies was due to lower-than-historical patient flow resulting from lower Henry Schein One transactional revenue. Additionally, the company’s financial services revenues were adversely impacted by lower equipment sales volume.
Margin Trend
In the reported quarter, gross profit totaled $754.3 million. Gross margin contracted 378 basis points (bps) to 26.6% on a 0.9% fall in gross profit.
Selling, general and administrative expenses declined 2.6% to $559.6 million in the quarter under review.
Overall adjusted operating profit was $194.7 million, up 4.4% year over year. However, adjusted operating margin contracted 58 bps year over year to 6.9%.
Financial Position
The company exited the third quarter of 2020 with cash and cash equivalents of $533.5 million compared with $296.1 million at the end of the second quarter. Long-term debt for the company at the end of the third quarter was $515.4 million compared with $515.8 million at the end of the second quarter of 2020.
Cumulative net cash used in operating activities from continuing operations at the end of the third quarter was $248.4 million compared with net cash provided by operating activities from continuing operations of $525.2 million in the year-ago period.
2020 Guidance
As the uncertainty of the pandemic and its impact on business operations cannot be ascertained at present, the company is not providing any financial guidance for the year right now.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 7.78% due to these changes.
VGM Scores
At this time, Henry Schein has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Henry Schein has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.