Henry Schein, Inc. (HSIC - Free Report) reported adjusted earnings per share (EPS) of $1.75 in the second quarter of 2017, up 6.7% year over year. Adjusted EPS also surpassed the Zacks Consensus Estimate of $1.73. The year-over-year upside in earnings was driven by strong revenue growth.
Henry Schein’s reported net income in the second quarter came in at $139.3 million or $1.75 per share, reflecting year-over-year growth of 2.9% and 6.7%, respectively.
Revenues in Detail
Henry Schein reported revenues of $3.06 billion in the second quarter, up 6.5% year over year and also above the Zacks Consensus Estimate of $3.05 billion. The year-over-year improvement came on the back of 7.7% growth in local currencies partially offset by a 1.2% decline owing to foreign currency exchange. At local currencies, internally generated sales increased 4.4% and acquisition growth was 3.3%.
Henry Schein, Inc. Price, Consensus and EPS Surprise
The company recorded sales of $2.03 billion in the North American market, up 5.6% year over year. Sales were $1.03 billion in the international market, up 8.3% 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 second quarter, the company derived $1.49 billion in revenues from global Dental sales, up 8.4% year over year. This includes 9.4% growth in local currencies and 1% decline owing to foreign currency exchange. At local currencies, internally generated sales increased 3.1% and acquisition growth was 6.3%. Internal growth at local currencies included 3.8% growth in North America and 2% rise internationally.
The company's global Animal Health segment witnessed 4.4% improvement in revenues to $891.3 million. This includes 6.7% growth in local currencies and 2.3% decline related to foreign currency exchange. At local currencies, internally generated sales increased 5.8% and acquisition growth was 0.9%. The 5.8% internal growth in local currencies included 5.9% growth in North America and 5.7% growth internationally.
Worldwide Medical revenues scaled 6.1% year over year to $571.4 million. Growth in local currencies was 6.2%, with a 0.1% decrease owing to adverse foreign exchange.
Revenues from global Technology and Value-added Services grew 1.4% to $108.5 million. This included 2.8% growth in local currencies and a 1.4% decline related to foreign currency exchange. There was 0.6% contribution from acquisitions during the quarter under review.
Margin Trends
Gross profit increased 4.7% to $839.2 million in the reported quarter. However, gross margin declined 50 basis points (bps) from the year-ago quarter to 27.4% due to a 7.2% rise in cost of sales, higher than the revenue growth rate.
Despite a 4.7% rise in selling, general & administrative expenses of $628.5 million, adjusted operating income improved 4.8% year over year to $210.7 million. Moreover, adjusted operating margin remained flat year over year at 6.9% in the reported quarter.
Financial Position
Henry Schein exited second-quarter 2017 with cash and cash equivalents of $74.7 million, compared with $62.8 million at the end the first quarter. Year-to-date net cash provided by operating activities was $228.7 million, compared with $277.2 million in the year-ago period.
During the quarter under review, the company bought back approximately 289,000 shares for almost $50 million. At the close of the second quarter, the company had $150 million authorized for future repurchases of its common stock.
2017 EPS Guidance Intact
Henry Schein reaffirmed its 2017 reported EPS guidance (except for the $0.04 litigation settlement expense). The company still expects EPS in the range of $7.17–$7.30, reflecting 8–10% growth from the 2016 EPS figure of $6.61.
The Zacks Consensus Estimate for 2017 adjusted EPS is $7.28, within the guided range.
Our Take
Henry Schein exited second-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.
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 & Key Picks
Henry Schein has a Zacks Rank #2 (Buy). A few other top-ranked medical stocks are Edwards Lifesciences Corporation (EW - Free Report) , INSYS Therapeutics, Inc. and Align Technology, Inc. (ALGN - Free Report) . Notably, Edwards Lifesciences, INSYS Therapeutics and Align Technology sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
INSYS Therapeutics has a long-term expected earnings growth rate of 20%. The stock posted a stellar four-quarter average earnings surprise of 60.7%.
Align Technology has an expected long-term adjusted earnings growth of almost 26.6%. The stock has added roughly 25.9% over the last three months.
Edwards Lifesciences has a long-term expected earnings growth rate of 15.2%. The stock has gained around 5.9% over the last three months.
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Henry Schein, Inc. (HSIC - Free Report) reported adjusted earnings per share (EPS) of $1.75 in the second quarter of 2017, up 6.7% year over year. Adjusted EPS also surpassed the Zacks Consensus Estimate of $1.73. The year-over-year upside in earnings was driven by strong revenue growth.
Henry Schein’s reported net income in the second quarter came in at $139.3 million or $1.75 per share, reflecting year-over-year growth of 2.9% and 6.7%, respectively.
Revenues in Detail
Henry Schein reported revenues of $3.06 billion in the second quarter, up 6.5% year over year and also above the Zacks Consensus Estimate of $3.05 billion. The year-over-year improvement came on the back of 7.7% growth in local currencies partially offset by a 1.2% decline owing to foreign currency exchange. At local currencies, internally generated sales increased 4.4% and acquisition growth was 3.3%.
Henry Schein, Inc. Price, Consensus and EPS Surprise
The company recorded sales of $2.03 billion in the North American market, up 5.6% year over year. Sales were $1.03 billion in the international market, up 8.3% 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 second quarter, the company derived $1.49 billion in revenues from global Dental sales, up 8.4% year over year. This includes 9.4% growth in local currencies and 1% decline owing to foreign currency exchange. At local currencies, internally generated sales increased 3.1% and acquisition growth was 6.3%. Internal growth at local currencies included 3.8% growth in North America and 2% rise internationally.
The company's global Animal Health segment witnessed 4.4% improvement in revenues to $891.3 million. This includes 6.7% growth in local currencies and 2.3% decline related to foreign currency exchange. At local currencies, internally generated sales increased 5.8% and acquisition growth was 0.9%. The 5.8% internal growth in local currencies included 5.9% growth in North America and 5.7% growth internationally.
Worldwide Medical revenues scaled 6.1% year over year to $571.4 million. Growth in local currencies was 6.2%, with a 0.1% decrease owing to adverse foreign exchange.
Revenues from global Technology and Value-added Services grew 1.4% to $108.5 million. This included 2.8% growth in local currencies and a 1.4% decline related to foreign currency exchange. There was 0.6% contribution from acquisitions during the quarter under review.
Margin Trends
Gross profit increased 4.7% to $839.2 million in the reported quarter. However, gross margin declined 50 basis points (bps) from the year-ago quarter to 27.4% due to a 7.2% rise in cost of sales, higher than the revenue growth rate.
Despite a 4.7% rise in selling, general & administrative expenses of $628.5 million, adjusted operating income improved 4.8% year over year to $210.7 million. Moreover, adjusted operating margin remained flat year over year at 6.9% in the reported quarter.
Financial Position
Henry Schein exited second-quarter 2017 with cash and cash equivalents of $74.7 million, compared with $62.8 million at the end the first quarter. Year-to-date net cash provided by operating activities was $228.7 million, compared with $277.2 million in the year-ago period.
During the quarter under review, the company bought back approximately 289,000 shares for almost $50 million. At the close of the second quarter, the company had $150 million authorized for future repurchases of its common stock.
2017 EPS Guidance Intact
Henry Schein reaffirmed its 2017 reported EPS guidance (except for the $0.04 litigation settlement expense). The company still expects EPS in the range of $7.17–$7.30, reflecting 8–10% growth from the 2016 EPS figure of $6.61.
The Zacks Consensus Estimate for 2017 adjusted EPS is $7.28, within the guided range.
Our Take
Henry Schein exited second-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.
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 & Key Picks
Henry Schein has a Zacks Rank #2 (Buy). A few other top-ranked medical stocks are Edwards Lifesciences Corporation (EW - Free Report) , INSYS Therapeutics, Inc. and Align Technology, Inc. (ALGN - Free Report) . Notably, Edwards Lifesciences, INSYS Therapeutics and Align Technology sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
INSYS Therapeutics has a long-term expected earnings growth rate of 20%. The stock posted a stellar four-quarter average earnings surprise of 60.7%.
Align Technology has an expected long-term adjusted earnings growth of almost 26.6%. The stock has added roughly 25.9% over the last three months.
Edwards Lifesciences has a long-term expected earnings growth rate of 15.2%. The stock has gained around 5.9% over the last three months.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look. See the pot trades we're targeting>>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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