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Henry Schein (HSIC) Q3 Earnings Top Estimates, Margins Dip
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Henry Schein, Inc. (HSIC - Free Report) reported adjusted earnings per share (EPS) of $1.03 from continuing operations in the third quarter of 2020, reflecting an improvement of 14.4% from the year-ago EPS of 90 cents. Moreover, adjusted EPS surpassed the Zacks Consensus Estimate by 43.1%. The quarter’s adjustments exclude the impact of certain restructuring charges.
GAAP EPS in the third quarter was 99 cents, up 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.
Henry Schein, Inc. Price, Consensus and EPS Surprise
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’s 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.
Our Take
Henry Schein exited the third quarter of 2020 with better-than-expected results despite adversities posed by the coronavirus outbreak. The company saw robust performances by all three of its operating businesses. The company’s international as well as North American performance were also impressive. The company witnessed strong demand for PPE and COVID-19-related products along with a strong rebound in sales.
Henry Schein’s distribution agreement with U.K.-based manufacturer of air purifier systems — Radic8 — and Zyris, Inc. buoys optimism on the stock.
Meanwhile, contraction of both margins is deterring. The company’s inability to provide financial guidance raises apprehensions.
Zacks Rank and Key Picks
Henry Schein currently has a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader medical space are West Pharmaceutical Services, Inc. (WST - Free Report) , Thermo Fisher Scientific Inc. (TMO - Free Report) and Align Technology, Inc. (ALGN - Free Report) .
West Pharmaceutical reported third-quarter 2020 adjusted EPS of $1.15, beating the Zacks Consensus Estimate by 13.9%. Net revenues of $548 million outpaced the consensus estimate by 7.2%. It currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Thermo Fisher, a Zacks Rank #2 company, reported third-quarter 2020 adjusted EPS of $5.63, beating the Zacks Consensus Estimate by 28.8%. Revenues of $8.52 billion outpaced the consensus mark by 10%.
Align Technology reported reported third-quarter 2020 adjusted EPS of $2.25, surpassing the Zacks Consensus Estimate by a stupendous 281.4%. Net revenues of $734.1 million exceeded the Zacks Consensus Estimate by 38%. It currently carries a Zacks Rank #2.
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Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
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Henry Schein (HSIC) Q3 Earnings Top Estimates, Margins Dip
Henry Schein, Inc. (HSIC - Free Report) reported adjusted earnings per share (EPS) of $1.03 from continuing operations in the third quarter of 2020, reflecting an improvement of 14.4% from the year-ago EPS of 90 cents. Moreover, adjusted EPS surpassed the Zacks Consensus Estimate by 43.1%. The quarter’s adjustments exclude the impact of certain restructuring charges.
GAAP EPS in the third quarter was 99 cents, up 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.
Henry Schein, Inc. Price, Consensus and EPS Surprise
Henry Schein, Inc. price-consensus-eps-surprise-chart | Henry Schein, Inc. Quote
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’s 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.
Our Take
Henry Schein exited the third quarter of 2020 with better-than-expected results despite adversities posed by the coronavirus outbreak. The company saw robust performances by all three of its operating businesses. The company’s international as well as North American performance were also impressive. The company witnessed strong demand for PPE and COVID-19-related products along with a strong rebound in sales.
Henry Schein’s distribution agreement with U.K.-based manufacturer of air purifier systems — Radic8 — and Zyris, Inc. buoys optimism on the stock.
Meanwhile, contraction of both margins is deterring. The company’s inability to provide financial guidance raises apprehensions.
Zacks Rank and Key Picks
Henry Schein currently has a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader medical space are West Pharmaceutical Services, Inc. (WST - Free Report) , Thermo Fisher Scientific Inc. (TMO - Free Report) and Align Technology, Inc. (ALGN - Free Report) .
West Pharmaceutical reported third-quarter 2020 adjusted EPS of $1.15, beating the Zacks Consensus Estimate by 13.9%. Net revenues of $548 million outpaced the consensus estimate by 7.2%. It currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Thermo Fisher, a Zacks Rank #2 company, reported third-quarter 2020 adjusted EPS of $5.63, beating the Zacks Consensus Estimate by 28.8%. Revenues of $8.52 billion outpaced the consensus mark by 10%.
Align Technology reported reported third-quarter 2020 adjusted EPS of $2.25, surpassing the Zacks Consensus Estimate by a stupendous 281.4%. Net revenues of $734.1 million exceeded the Zacks Consensus Estimate by 38%. It currently carries a Zacks Rank #2.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>