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Here's Why You Should Buy Henry Schein (HSIC) Stock Now

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Henry Schein, Inc. (HSIC - Free Report) has been gaining on robust sales of personal protective equipment (PPE) and COVID-related products. Its international performance has also been impressive. Its better-than-expected revenues in the first quarter of 2021 buoy optimism. However, economic problems and a stiff competitive landscape are concerning.

Over the past year, the Zacks Rank #2 (Buy) stock has gained 42.7% compared with 28.1% growth of the industry and 43.2% rise of the S&P 500 composite.

The renowned global distributor of health care products and services has a market capitalization of $11.3 billion. The company expects to maintain strong product performance. It surpassed estimates in the trailing four quarters, the average surprise being 49.16%.

Let’s delve deeper.

Key Drivers

Strong Q1 Performance: Henry Schein exited first-quarter 2021 with better-than-expected results. All three operating arms performed impressively along with robust international results. Strong demand for PPE and COVID-related products along with a solid sales rebound were witnessed. Strength in the Henry Schein One portfolio augurs well. Operating margin expansion also bodes well. Widespread network and channel mix, and favorable long-term trends in the dental business also look encouraging.

Dental Business Trends Favorable for the Long Term: Henry Schein’s strategy to expand digital dentistry globally is encouraging. The company is busy promoting digital workflows for general dentistry as well as dental specialties. The company is currently focusing on offering a diversified portfolio and value-added services along with favorable end markets.

Per a report by The Business Research Company, the global dental services market was valued at approximately $436.2 billion in 2018 and is expected to reach approximately $629.3 billion by 2022, at a CAGR of 9.6%.

Strategic Acquisitions & Partnerships: Henry Schein’s recent deals instill investors’ confidence. The company, in March, announced a new investment in Stradis Medical, which is expected to strengthen Henry Schein’s foothold in the ambulatory surgery market.

In January, Henry Schein’s U.S. dental laboratory business, Zahn Dental, entered into a distribution agreement with Spain-based Terrats Medical. The same month, Henry Schein announced the acquisition of a majority ownership in Prism Medical Products, which will enable Henry Schein’s U.S. medical division to enter the multibillion-dollar market for home medical equipment and supplies.

However, 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 put pressure on players in the healthcare industry, with Henry Schein being no exception.

Moreover, the U.S. healthcare products and service distribution industry are highly competitive and consist principally of national, regional and local distributors. In the North American dental products market, the company faces stiff competition from Patterson Dental business of Patterson Companies Inc. and Benco Dental Supply.

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 7.1% north to $3.91.

The Zacks Consensus Estimate for second-quarter 2021 revenues is pegged at $2.88 billion, suggesting a 70.9% surge from the year-ago reported number.

Key Picks

A few other similar-ranked stocks from the broader medical space are National Vision Holdings, Inc. (EYE - Free Report) , Owens & Minor, Inc. (OMI - Free Report) and Envista Holdings Corporation (NVST - Free Report) , each carrying a Zacks Rank #2. You can see the complete list of Zacks #1 Rank (Strong Buy) stocks here.

National Vision has a projected long-term earnings growth rate of 12%.

Owens & Minor has a projected long-term earnings growth rate of 15%.

Envista Holdings has an estimated long-term earnings growth rate of 26%.

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