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Henry Schein (HSIC) Tops Q1 Earnings, Reaffirms '17 View
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Henry Schein, Inc. (HSIC - Free Report) reported adjusted earnings per share (EPS) of $1.76 in the first quarter of 2017, up 24.8% year over year. Adjusted EPS also surpassed the Zacks Consensus Estimate of $1.66. The year-over-year upside in earnings was driven by strong revenue growth.
Henry Schein’s reported net income in the first quarter came in at $140.7 million or $1.76 per share, reflecting year-over-year growth of 23.7% and 28.5%, respectively.
Revenues in Detail
Henry Schein reported revenues of $2.92 billion in the first quarter, up 7.7% year over year and also above the Zacks Consensus Estimate of $2.83 billion. The year-over-year improvement came on the back of 8.7% growth in local currencies and a 1.0% decline owing to foreign currency exchange. At local currencies, internally generated sales increased 5.9% and acquisition growth was 2.8%.
Henry Schein, Inc. Price, Consensus and EPS Surprise
The company recorded year-over-year sales growth of 5.6% or $1.94 billion in the North American market and 12.3% or $980.7 million in the international market.
Segment Analysis
Henry Schein derives revenues from four operating segments: Dental, Medical, Animal Health, and Technology and Value-added services.
In the first quarter, the company derived $1.40 billion in revenues from global Dental sales, up 7.9% year over year. This includes 8.2% growth in local currencies and 0.3% decline related to foreign currency exchange. At local currencies, internally generated sales increased 2.9% and acquisition growth was 5.3%. Internal growth at local currencies included 0.8% growth in North America and 6.8% rise internationally.
The company's global Animal Health segment witnessed 5.4% improvement in revenues to $812.9 million. This includes 8.1% growth in local currencies and 2.7% decline related to foreign currency exchange. At local currencies, internally generated sales increased 7.1% and acquisition growth was 1.0%. The 7.1% internal growth in local currencies included 5.5% growth in North America and 8.9% growth internationally.
Worldwide Medical sales scaled 11.3% year over year to $598.9 million. Internal sales growth in local currencies was 11.5%, with a 0.2% decrease owing to adverse foreign exchange.
Revenues from global Technology and Value-added Services grew 4.2% to $106.0 million. This included 5.5% growth in local currencies and a 1.3% decline related to foreign currency exchange. There was no contribution from acquisitions during the quarter under review.
Margin Trends
Gross profit increased 5.8% to $822.9 million in the reported quarter. However, gross margin declined 52 basis points (bps) from the year-ago quarter to 28.2%, due to an 8.5% rise in cost of sales, higher than the revenue growth rate.
On the back of a 5.2% rise in selling, general & administrative expenses of $628.9 million, adjusted operating income improved 7.6% year over year to $193.9 million. However, adjusted operating margin declined 1 bps to 6.6% in the reported quarter.
Financial Position
Henry Schein exited first-quarter 2017 with cash and cash equivalents of $62.8 million, compared with $62.3 million at the end of fiscal 2016. As of Apr 1, 2017, the company used cash of $52.5 million in operating activities, compared with $77.7 million at the end of Mar 26, 2016.
During the quarter under review, the company bought back approximately 308,000 shares for almost $50 million. At the close of the fourth quarter, the company had $200 million authorized for future repurchases of its common stock.
2017 EPS Guidance Intact
Henry Schein reaffirmed its 2017 reported EPS guidance. The company still expects to deliver EPS in the range of $7.17–$7.30, reflecting 16–18% growth from the 2016 EPS figure of $6.19.
The Zacks Consensus Estimate for 2017 adjusted EPS is $7.25.
Our Take
Henry Schein exited first-quarter 2017 on a solid note with earnings and sales beating the Zacks Consensus Estimate. All four of its operating segments delivered strong year-over-year growth. The company’s strong share gains in both the North American and overseas markets along with strong revenues raise optimism. Management was particularly upbeat about the strategic acquisitions made under the company’s technology and Value–Added Services segments.
However, despite the better-than-expected earnings performance, we are disappointed with the company’s unchanged EPS guidance for 2017. Meanwhile, the year-over-year deterioration in Henry Schein’s gross and operating margin was due to higher cost of sales and expenses. Also, foreign currency fluctuations continued to mar the company’s financials.
Zacks Rank & Other Key Picks
Henry Schein currently has a Zacks Rank #2 (Buy). Other top-ranked medical stocks include Hologic, Inc. (HOLX - Free Report) , Baxter International Inc. (BAX - Free Report) and Progenics Pharmaceuticals, Inc. . Hologic sports a Zacks Rank 1 (Strong Buy), while Baxter International and Progenics Pharmaceuticals carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Hologic gained 31.6% in the last one year, in comparison to the S&P 500’s 15.0%. The company has a stellar four-quarter average earnings surprise of over 4.16%.
Baxter International rose around 22.4% in the last one year, in comparison to the S&P 500. It has a four-quarter average earnings surprise of 17.14%.
Progenics Pharmaceuticals gained 38.8% in the past one year, better than the S&P 500 mark. It has a four-quarter average earnings surprise of 10.01%.
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Henry Schein (HSIC) Tops Q1 Earnings, Reaffirms '17 View
Henry Schein, Inc. (HSIC - Free Report) reported adjusted earnings per share (EPS) of $1.76 in the first quarter of 2017, up 24.8% year over year. Adjusted EPS also surpassed the Zacks Consensus Estimate of $1.66. The year-over-year upside in earnings was driven by strong revenue growth.
Henry Schein’s reported net income in the first quarter came in at $140.7 million or $1.76 per share, reflecting year-over-year growth of 23.7% and 28.5%, respectively.
Revenues in Detail
Henry Schein reported revenues of $2.92 billion in the first quarter, up 7.7% year over year and also above the Zacks Consensus Estimate of $2.83 billion. The year-over-year improvement came on the back of 8.7% growth in local currencies and a 1.0% decline owing to foreign currency exchange. At local currencies, internally generated sales increased 5.9% and acquisition growth was 2.8%.
Henry Schein, Inc. Price, Consensus and EPS Surprise
Henry Schein, Inc. Price, Consensus and EPS Surprise | Henry Schein, Inc. Quote
The company recorded year-over-year sales growth of 5.6% or $1.94 billion in the North American market and 12.3% or $980.7 million in the international market.
Segment Analysis
Henry Schein derives revenues from four operating segments: Dental, Medical, Animal Health, and Technology and Value-added services.
In the first quarter, the company derived $1.40 billion in revenues from global Dental sales, up 7.9% year over year. This includes 8.2% growth in local currencies and 0.3% decline related to foreign currency exchange. At local currencies, internally generated sales increased 2.9% and acquisition growth was 5.3%. Internal growth at local currencies included 0.8% growth in North America and 6.8% rise internationally.
The company's global Animal Health segment witnessed 5.4% improvement in revenues to $812.9 million. This includes 8.1% growth in local currencies and 2.7% decline related to foreign currency exchange. At local currencies, internally generated sales increased 7.1% and acquisition growth was 1.0%. The 7.1% internal growth in local currencies included 5.5% growth in North America and 8.9% growth internationally.
Worldwide Medical sales scaled 11.3% year over year to $598.9 million. Internal sales growth in local currencies was 11.5%, with a 0.2% decrease owing to adverse foreign exchange.
Revenues from global Technology and Value-added Services grew 4.2% to $106.0 million. This included 5.5% growth in local currencies and a 1.3% decline related to foreign currency exchange. There was no contribution from acquisitions during the quarter under review.
Margin Trends
Gross profit increased 5.8% to $822.9 million in the reported quarter. However, gross margin declined 52 basis points (bps) from the year-ago quarter to 28.2%, due to an 8.5% rise in cost of sales, higher than the revenue growth rate.
On the back of a 5.2% rise in selling, general & administrative expenses of $628.9 million, adjusted operating income improved 7.6% year over year to $193.9 million. However, adjusted operating margin declined 1 bps to 6.6% in the reported quarter.
Financial Position
Henry Schein exited first-quarter 2017 with cash and cash equivalents of $62.8 million, compared with $62.3 million at the end of fiscal 2016. As of Apr 1, 2017, the company used cash of $52.5 million in operating activities, compared with $77.7 million at the end of Mar 26, 2016.
During the quarter under review, the company bought back approximately 308,000 shares for almost $50 million. At the close of the fourth quarter, the company had $200 million authorized for future repurchases of its common stock.
2017 EPS Guidance Intact
Henry Schein reaffirmed its 2017 reported EPS guidance. The company still expects to deliver EPS in the range of $7.17–$7.30, reflecting 16–18% growth from the 2016 EPS figure of $6.19.
The Zacks Consensus Estimate for 2017 adjusted EPS is $7.25.
Our Take
Henry Schein exited first-quarter 2017 on a solid note with earnings and sales beating the Zacks Consensus Estimate. All four of its operating segments delivered strong year-over-year growth. The company’s strong share gains in both the North American and overseas markets along with strong revenues raise optimism. Management was particularly upbeat about the strategic acquisitions made under the company’s technology and Value–Added Services segments.
However, despite the better-than-expected earnings performance, we are disappointed with the company’s unchanged EPS guidance for 2017. Meanwhile, the year-over-year deterioration in Henry Schein’s gross and operating margin was due to higher cost of sales and expenses. Also, foreign currency fluctuations continued to mar the company’s financials.
Zacks Rank & Other Key Picks
Henry Schein currently has a Zacks Rank #2 (Buy). Other top-ranked medical stocks include Hologic, Inc. (HOLX - Free Report) , Baxter International Inc. (BAX - Free Report) and Progenics Pharmaceuticals, Inc. . Hologic sports a Zacks Rank 1 (Strong Buy), while Baxter International and Progenics Pharmaceuticals carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Hologic gained 31.6% in the last one year, in comparison to the S&P 500’s 15.0%. The company has a stellar four-quarter average earnings surprise of over 4.16%.
Baxter International rose around 22.4% in the last one year, in comparison to the S&P 500. It has a four-quarter average earnings surprise of 17.14%.
Progenics Pharmaceuticals gained 38.8% in the past one year, better than the S&P 500 mark. It has a four-quarter average earnings surprise of 10.01%.
Zacks’ Best Private Investment Ideas
While we are happy to share many articles like this on the website, our best recommendations and most in-depth research are not available to the public.
Starting today, for the next month, you can follow all Zacks' private buys and sells in real time. Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Click here for Zacks' private trades >>