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Here's Why You Should Invest In Henry Schein (HSIC) Now
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Henry Schein, Inc. (HSIC - Free Report) is gaining from its widespread network as well as strategic acquisitions and partnerships. The market is optimistic about the stock given the robust performance by all three of Henry Schein’s operating businesses. The company’s dental technology joint venture (JV) Henry Schein One holds long-term potential. However, macroeconomic woes and impact of GPOs do not bode well.
Over the past year, this Zacks Rank #2 (Buy) stock has gained 23% compared with 37.1% growth of the industry and 38.2% rise of the S&P 500 composite.
The renowned global distributor of health care products and services has a market capitalization of $10.95 billion. Its earnings surpassed the Zacks Consensus Estimate by 16.8%.
Over the past five years, the company’s growth declined 0.2% against the industry’s 11.1% rise and the S&P 500’s 2.8% increase. The long-term expected growth rate is estimated at 13.9%, comparing with the industry’s growth expectation of 13.7% and the S&P 500’s estimated 11.3% growth.
Image Source: Zacks Investment Research
Let’s delve deeper.
Factors at Play
Widespread Network & Channel Mix: Henry Schein’s distribution business boasts a wide global footprint with 61 distribution centers. We believe the company’s worldwide reach is a major competitive advantage over other players in the healthcare distribution industry. During the second quarter of 2021, the company noted improved patient traffic despite a rise in new COVID-19 cases. Henry Schein One billings associated with dental claims processing were above the pre-pandemic level, driving greater practice purchases. Global dental consumable merchandise internal sales increased 90.5% in the second quarter compared to the prior year, with solid dental consumable merchandise sales growth in the United States, Canada, Australia, New Zealand, Brazil and Asia.
Segmental Growth: We are upbeat about Henry Schein’s solid performances across all three of its operating businesses, Dental, Medical, and Technology and Value-Added Services, in the second quarter of 2021. During the quarter, global Dental sales registered growth of 102.9% year over year. Meanwhile, the company’s global Medical revenues surged 46.5% year over year and revenues from global Technology and Value-added Services arm rose 44.5% year over year.
Henry Schein One Holds Potential: Henry Schein One’s dental software business has been progressing well despite a challenging business environment. The Henry Schein One reported record-high revenues during second-quarter 2021. It is also the largest sales contributor to the company’s Technology and Value-Added Service business. The recent additions to the Henry Schein One portfolio include a new software module that integrates dental and medical patient records, the Dentrix Imaging Center and various product enhancements for Henry Schein One Solutions.
Expansion Via Acquisitions & Partnerships: Henry Schein’s revenue growth has been consistently supported by niche acquisitions and partnerships. We are upbeat about the company’s acquisition of eAssist Dental Solutions in June 2021. This buyout advances the company’s mission to offer best-in-breed solutions to help dental practices operate more efficiently and profitably. In May 2021, Henry Schein One acquired a majority ownership in Jarvis Analytics. The company also announced a new investment in Stradis Medical in March 2021, which is expected to strengthen Henry Schein’s foothold in the ambulatory surgery market.
Downsides
Impact of Group Purchasing Organizations (GPOs): In light of the numerous headwinds faced by the healthcare industry, some large integrated health care providers and GPOs have gained considerable purchasing power. Moreover, the ongoing economic climate bolstered the bargaining power of GPOs. The GPOs have also increased pricing pressure in the industry. This might be a drag on Henry Schein’s business in the future.
Contagion of Economic Problems: The current macroeconomic environment across the globe has affected Henry Schein’s financial operations. Governments and insurance companies continue to look for ways to contain the rising cost of healthcare. This might build pressure on players in the healthcare industry, with Henry Schein being no exception. Further, the company is susceptible to fluctuating currency rates since it derives a substantial amount of its revenues from international markets.
Estimate Trend
Henry Schein has been witnessing a positive estimate revision trend for 2021. Over the past 90 days, the Zacks Consensus Estimate for its earnings has moved 5.8% north to $4.19.
The Zacks Consensus Estimate for its third-quarter 2021 revenues is pegged at $2.93 billion, suggesting a 3.3% rise from the year-ago reported number.
Image: Bigstock
Here's Why You Should Invest In Henry Schein (HSIC) Now
Henry Schein, Inc. (HSIC - Free Report) is gaining from its widespread network as well as strategic acquisitions and partnerships. The market is optimistic about the stock given the robust performance by all three of Henry Schein’s operating businesses. The company’s dental technology joint venture (JV) Henry Schein One holds long-term potential. However, macroeconomic woes and impact of GPOs do not bode well.
Over the past year, this Zacks Rank #2 (Buy) stock has gained 23% compared with 37.1% growth of the industry and 38.2% rise of the S&P 500 composite.
The renowned global distributor of health care products and services has a market capitalization of $10.95 billion. Its earnings surpassed the Zacks Consensus Estimate by 16.8%.
Over the past five years, the company’s growth declined 0.2% against the industry’s 11.1% rise and the S&P 500’s 2.8% increase. The long-term expected growth rate is estimated at 13.9%, comparing with the industry’s growth expectation of 13.7% and the S&P 500’s estimated 11.3% growth.
Image Source: Zacks Investment Research
Let’s delve deeper.
Factors at Play
Widespread Network & Channel Mix: Henry Schein’s distribution business boasts a wide global footprint with 61 distribution centers. We believe the company’s worldwide reach is a major competitive advantage over other players in the healthcare distribution industry. During the second quarter of 2021, the company noted improved patient traffic despite a rise in new COVID-19 cases. Henry Schein One billings associated with dental claims processing were above the pre-pandemic level, driving greater practice purchases. Global dental consumable merchandise internal sales increased 90.5% in the second quarter compared to the prior year, with solid dental consumable merchandise sales growth in the United States, Canada, Australia, New Zealand, Brazil and Asia.
Segmental Growth: We are upbeat about Henry Schein’s solid performances across all three of its operating businesses, Dental, Medical, and Technology and Value-Added Services, in the second quarter of 2021. During the quarter, global Dental sales registered growth of 102.9% year over year. Meanwhile, the company’s global Medical revenues surged 46.5% year over year and revenues from global Technology and Value-added Services arm rose 44.5% year over year.
Henry Schein One Holds Potential: Henry Schein One’s dental software business has been progressing well despite a challenging business environment. The Henry Schein One reported record-high revenues during second-quarter 2021. It is also the largest sales contributor to the company’s Technology and Value-Added Service business. The recent additions to the Henry Schein One portfolio include a new software module that integrates dental and medical patient records, the Dentrix Imaging Center and various product enhancements for Henry Schein One Solutions.
Expansion Via Acquisitions & Partnerships: Henry Schein’s revenue growth has been consistently supported by niche acquisitions and partnerships. We are upbeat about the company’s acquisition of eAssist Dental Solutions in June 2021. This buyout advances the company’s mission to offer best-in-breed solutions to help dental practices operate more efficiently and profitably. In May 2021, Henry Schein One acquired a majority ownership in Jarvis Analytics. The company also announced a new investment in Stradis Medical in March 2021, which is expected to strengthen Henry Schein’s foothold in the ambulatory surgery market.
Downsides
Impact of Group Purchasing Organizations (GPOs): In light of the numerous headwinds faced by the healthcare industry, some large integrated health care providers and GPOs have gained considerable purchasing power. Moreover, the ongoing economic climate bolstered the bargaining power of GPOs. The GPOs have also increased pricing pressure in the industry. This might be a drag on Henry Schein’s business in the future.
Contagion of Economic Problems: The current macroeconomic environment across the globe has affected Henry Schein’s financial operations. Governments and insurance companies continue to look for ways to contain the rising cost of healthcare. This might build pressure on players in the healthcare industry, with Henry Schein being no exception. Further, the company is susceptible to fluctuating currency rates since it derives a substantial amount of its revenues from international markets.
Estimate Trend
Henry Schein has been witnessing a positive estimate revision trend for 2021. Over the past 90 days, the Zacks Consensus Estimate for its earnings has moved 5.8% north to $4.19.
The Zacks Consensus Estimate for its third-quarter 2021 revenues is pegged at $2.93 billion, suggesting a 3.3% rise from the year-ago reported number.
Key Picks
A few better-ranked stocks from the broader medical space include Intuitive Surgical, Inc. (ISRG - Free Report) , IDEXX Laboratories, Inc. (IDXX - Free Report) and Envista Holdings Corporation (NVST - Free Report) , each sporting a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Intuitive Surgical has a long-term earnings growth rate of 9.7%.
IDEXX has a long-term earnings growth rate of 19.9%.
Envista Holdings has a long-term earnings growth rate of 27.4%.