Henry Schein, Inc. ( HSIC Quick Quote HSIC - Free Report) has been gaining on its extensive global foothold and diverse channel mix. The favorable dental business trend is encouraging. Moreover, the raised earnings guidance is indicative of the company’s bullish trend. However, economic problems and a stiff competitive landscape remain concerns.
Over the past six months, this Zacks Rank #2 (Buy) stock has gained 8.6% against the 0.6% fall of the
industry and 8.7% rise of the S&P 500 composite.
The renowned global distributor of health care products and services has a market capitalization of $10.69 billion. The company expects to maintain strong product performance. It surpassed earnings estimates in the trailing four quarters, the average surprise being 28.37%.
Let’s delve deeper.
Key Drivers Widespread Network and Channel Mix: Henry Schein’s distribution business boasts a wide global footprint with 61 distribution centers. Apart from North America and Europe, the company has a presence in Australia and New Zealand as well as in emerging nations like China, Brazil, Israel, Czech Republic and Poland. We believe Henry Schein’s worldwide reach is a major competitive advantage over other players in the healthcare distribution industry. During the second quarter, Henry Schein noted improved patient traffic despite a rise in new COVID-19 cases. The most recent American Dental Association data shows current patient traffic at 88% of the pre-pandemic level. Dental Business Trends Favorable for Long Term: We are optimistic about Henry Schein’s strategy to expand digital dentistry globally. Henry Schein 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 a favorable end market. During the second quarter, Henry Schein’s global dental sales increased 102.9% compared with the same period last year. Image Source: Zacks Investment Research
Per a report by MarketWatch, the global dental services market size was valued at $418.3 million in 2020 and is projected to reach $728.6 million by 2027, at a CAGR of 7.8%
Upbeat Guidance: Henry Schein has raised the guidance for 2021 adjusted earnings per share from continuing operations, which is now expected to be at or above $3.85 (earlier-provided expectation being at or above $3.70). Downsides Contagion of Economic Problems: 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. Tough Competition: The U.S. healthcare products and service distribution industry is highly competitive and consists 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 5.6% north to $4.31.
The Zacks Consensus Estimate for third-quarter 2021 revenues is pegged at $2.94 billion, suggesting a 3.6% rise from the year-ago reported number.
Other Key Picks
A few other similar-ranked stocks from the broader medical space are
Alcon Inc ( ALC Quick Quote ALC - Free Report) , West Pharmaceutical Services, Inc. ( WST Quick Quote WST - Free Report) and Becton, Dickinson and Company ( BDX Quick Quote BDX - Free Report) , each carrying a Zacks Rank #2. You can see the complete list of Zacks #1 Rank (Strong Buy) stocks here.
Alcon has an estimated long-term earnings growth rate of 18%.
West Pharmaceutical Services has an estimated long-term earnings growth rate of 27%.
Becton, Dickinson and Company has a projected long-term earnings growth rate of 8%.