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Henry Schein (HSIC) Down 3.3% Since Earnings Report: Can It Rebound?
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It has been about a month since the last earnings report for Henry Schein, Inc. (HSIC - Free Report) . Shares have lost about 3.3% in that time frame.
Will the recent negative trend continue leading up to its next earnings release, or is HSIC due for a breakout? 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 drivers.
Recent Earnings
Henry Schein reported adjusted earnings per share (EPS) of 97 cents in the fourth quarter of 2017, up 3.2% year over year. Adjusted EPS remained in line with the Zacks Consensus Estimate. The year-over-year upside in earnings was driven by strong revenue growth across all the business segments.
Adjusted EPS for the year 2017 was $3.60, an 8.8% improvement from the year-ago period. This also remains in line with the Zacks Consensus Estimate.
Revenues in Detail
Henry Schein reported net sales of $3.32 billion in the fourth quarter, up 6.4% year over year and marginally above the Zacks Consensus Estimate of $3.30 billion. The year-over-year improvement came on the back of 5.1% internal sales growth in local currencies and 2.4% increase owing to foreign currency exchange. Acquisition growth was 4% in the quarter.
Net sales for the full year were $12.46 billion, a 7.7% improvement from the year-ago number. The top line also exceeded the Zacks Consensus Estimate of $12.44 billion.
In the fourth quarter, the company recorded sales of $2.19 billion in the North American market, up 3.1% year over year. Sales totaled $1.13 billion in the international market, up 13.1% year over year.
Segment Analysis
Henry Schein derives revenues from four operating segments: Dental, Medical, Animal Health, and Technology and Value-added services.
In the fourth quarter, the company derived $6.05 billion in revenues from global Dental sales, up 8.9% year over year. This includes 7.9% growth in local currencies and 1% contribution from foreign currency exchange. At local currencies, internally generated sales increased 3% and acquisition growth was 6.3%.
The quarterly result also had a negative impact of 5.1% from an additional week in the year-ago period. Internal growth at local currencies included 6.7% growth in North America and 0.1% rise internationally.
The company's global Animal Health segment witnessed 6.2% rise in revenues to $889.8 million. This includes 3% growth in local currencies and 3.2% increase from foreign currency exchange. At local currencies, internally generated sales increased 4.5% and acquisition growth was 3.7%. One extra week in 2016 had a 5.2% negative impact on the quarterly sales performance. The internal growth in local currencies included 6% rise in North America and 2.9% improvement internationally.
Worldwide Medical revenues rose 2.6% year over year to $636.9 million. Growth in local currencies was 2.3%, with a 0.3% increase owing to favorable foreign exchange.
Revenues from global Technology and Value-added Services grew 2.1% to $114.6 million. This included 1% growth in local currencies and a 1.1% rise related to foreign currency exchange. Acquisitions contributed 0.6% in the quarter under review.
Margin Trend
Gross profit increased 4.8% to $900.9 million in the reported quarter. However, gross margin contracted 39 basis points (bps) from the year-ago quarter to 27.2% due to a 6.9% rise in cost of sales, higher than the revenue growth rate.
Despite a 4.8% rise in selling, general & administrative expenses of $659.8 million, adjusted operating income improved 4.8% year over year to $241.2 million. However, adjusted operating margin declined 10 bps year over year to 7.3% in the reported quarter.
Financial Position
Henry Schein exited the year 2017 with cash and cash equivalents of $174.7 million, compared with $62.4 million at the end of 2016. Full-year net cash provided by operating activities was $238 million, compared with $264.5 million in the year-ago period.
During the quarter under review, the company bought back approximately 3.2 million shares for almost $225 million. At the close of the fourth quarter, the company had $200 million authorized for repurchase of common stock.
2018 Guidance
Henry Schein raised its 2018 EPS guidance to reflect the impact of U.S. tax reform legislation, including the estimated 2 cents impact associated with certain one-time cash bonus. The company currently expects EPS in the range of $4.03-$4.14, reflecting 57–61% growth from the 2017 reported EPS figure of $2.57. The previous 2018 EPS guidance range was $3.85-$3.96. The Zacks Consensus Estimate for 2018 adjusted EPS is $3.95, below the guided range.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. There have been three revisions higher for the current quarter compared to six lower.
At this time, HSIC has a nice Growth Score of B, however its Momentum is doing a bit better with an A. Following the exact same course, the stock was also 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.
Based on our scores, the stock is equally suitable for value and momentum investors while growth investors may want to look elsewhere.
Outlook
Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Interestingly, HSIC 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) Down 3.3% Since Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for Henry Schein, Inc. (HSIC - Free Report) . Shares have lost about 3.3% in that time frame.
Will the recent negative trend continue leading up to its next earnings release, or is HSIC due for a breakout? 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 drivers.
Recent Earnings
Henry Schein reported adjusted earnings per share (EPS) of 97 cents in the fourth quarter of 2017, up 3.2% year over year. Adjusted EPS remained in line with the Zacks Consensus Estimate. The year-over-year upside in earnings was driven by strong revenue growth across all the business segments.
Adjusted EPS for the year 2017 was $3.60, an 8.8% improvement from the year-ago period. This also remains in line with the Zacks Consensus Estimate.
Revenues in Detail
Henry Schein reported net sales of $3.32 billion in the fourth quarter, up 6.4% year over year and marginally above the Zacks Consensus Estimate of $3.30 billion. The year-over-year improvement came on the back of 5.1% internal sales growth in local currencies and 2.4% increase owing to foreign currency exchange. Acquisition growth was 4% in the quarter.
Net sales for the full year were $12.46 billion, a 7.7% improvement from the year-ago number. The top line also exceeded the Zacks Consensus Estimate of $12.44 billion.
In the fourth quarter, the company recorded sales of $2.19 billion in the North American market, up 3.1% year over year. Sales totaled $1.13 billion in the international market, up 13.1% year over year.
Segment Analysis
Henry Schein derives revenues from four operating segments: Dental, Medical, Animal Health, and Technology and Value-added services.
In the fourth quarter, the company derived $6.05 billion in revenues from global Dental sales, up 8.9% year over year. This includes 7.9% growth in local currencies and 1% contribution from foreign currency exchange. At local currencies, internally generated sales increased 3% and acquisition growth was 6.3%.
The quarterly result also had a negative impact of 5.1% from an additional week in the year-ago period. Internal growth at local currencies included 6.7% growth in North America and 0.1% rise internationally.
The company's global Animal Health segment witnessed 6.2% rise in revenues to $889.8 million. This includes 3% growth in local currencies and 3.2% increase from foreign currency exchange. At local currencies, internally generated sales increased 4.5% and acquisition growth was 3.7%. One extra week in 2016 had a 5.2% negative impact on the quarterly sales performance. The internal growth in local currencies included 6% rise in North America and 2.9% improvement internationally.
Worldwide Medical revenues rose 2.6% year over year to $636.9 million. Growth in local currencies was 2.3%, with a 0.3% increase owing to favorable foreign exchange.
Revenues from global Technology and Value-added Services grew 2.1% to $114.6 million. This included 1% growth in local currencies and a 1.1% rise related to foreign currency exchange. Acquisitions contributed 0.6% in the quarter under review.
Margin Trend
Gross profit increased 4.8% to $900.9 million in the reported quarter. However, gross margin contracted 39 basis points (bps) from the year-ago quarter to 27.2% due to a 6.9% rise in cost of sales, higher than the revenue growth rate.
Despite a 4.8% rise in selling, general & administrative expenses of $659.8 million, adjusted operating income improved 4.8% year over year to $241.2 million. However, adjusted operating margin declined 10 bps year over year to 7.3% in the reported quarter.
Financial Position
Henry Schein exited the year 2017 with cash and cash equivalents of $174.7 million, compared with $62.4 million at the end of 2016. Full-year net cash provided by operating activities was $238 million, compared with $264.5 million in the year-ago period.
During the quarter under review, the company bought back approximately 3.2 million shares for almost $225 million. At the close of the fourth quarter, the company had $200 million authorized for repurchase of common stock.
2018 Guidance
Henry Schein raised its 2018 EPS guidance to reflect the impact of U.S. tax reform legislation, including the estimated 2 cents impact associated with certain one-time cash bonus. The company currently expects EPS in the range of $4.03-$4.14, reflecting 57–61% growth from the 2017 reported EPS figure of $2.57. The previous 2018 EPS guidance range was $3.85-$3.96. The Zacks Consensus Estimate for 2018 adjusted EPS is $3.95, below the guided range.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. There have been three revisions higher for the current quarter compared to six lower.
Henry Schein, Inc. Price and Consensus
Henry Schein, Inc. Price and Consensus | Henry Schein, Inc. Quote
VGM Scores
At this time, HSIC has a nice Growth Score of B, however its Momentum is doing a bit better with an A. Following the exact same course, the stock was also 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.
Based on our scores, the stock is equally suitable for value and momentum investors while growth investors may want to look elsewhere.
Outlook
Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Interestingly, HSIC has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.